STRATEGIC REVIEW OF IRISH MARITIME TRANSPORT · PDF filePAGE 3 STRATEGIC REVIEW OF IRISH...

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STRATEGIC REVIEW OF IRISH MARITIME TRANSPORT SECTOR

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Page 1: STRATEGIC REVIEW OF IRISH MARITIME TRANSPORT · PDF filePAGE 3 STRATEGIC REVIEW OF IRISH MARITIME TRANSPORT SECTOR AUTHORS This Report was prepared by Glenn Murphy, Director of the

STRATEGIC REVIEW OF IRISH

MARITIME TRANSPORT SECTOR

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THE IRISH MARITIME DEVELOPMENT OFFICE (IMDO) 3

Strategic Review Conclusions 4

Objectives 5

Scope and Methodology 5

Scope of the Report 5

SECTION 1 THE GLOBAL ECONOMY & MARITIME TRANSPORT 6

Introduction 6

Global Shipping Markets 6

Impact of Globalisation on Shipping 7

Market Growth 8

Ship Registration 11

Maritime Clusters 12

Singapore 12

Maritime Commerce 13

London 13

Seafarer Employment 14

Shipping and Logistics 14

Port Trends 15

Port Integration 15

Container Traffi c Demand 15

Maritime Safety & Regulation 16

Corporate Responsibility & Risk Management Areas 17

Conclusions 18

SECTION 2 KEEPING EUROPEAN SHIPPING AFLOAT 19

Economic Profi le of Shipping in Europe 19

The Fall and Rise of European Shipping 20

European State Aid Guidelines to Maritime Transport 21

Fiscal Treatment of Ship-Owning Companies – Tonnage Tax 22

Labour-Related Costs 22

On-Board Training 22

Short Sea Shipping (SSS) 22

Motorways of the Sea (MWS) 22

Marco Polo 22

Current Status of EU Policy 23

EU Green Paper On Maritime Transport 23

Mid Term Review of White Paper 23

The Commission Communication on Freight Logistics 23

Conclusions 24

TABLE OF CONTENTS

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR & POLICY 1996 – 2005

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SECTION 3 THE IRISH MARKET 25

Introduction 25

Economic Overview 25

Industry Profi le 26

The Irish Maritime Cluster 27

Core Services 29

Ship-owning 29

Port Sector 30

Liner and Short Sea Shipping Services 32

Vital Stats: Liner Routes 33

Support and Agency Services 34

Vital Stats: Agency Services 34

Maritime Commerce 35

Banking & Finance 35

Vital Stats: Ship Finance 35

Insurance 36

Legal 36

Taxation & Accounting 36

Shipbroking 36

Freight and Logistics Operators 36

Knowledge and Innovation Services 37

Government & Regulators 38

Professional Bodies 39

New Horizons 40

Conclusions 41

APPENDICES 42

Strategic Review of the Maritime Transport Sector 43

Bibliography 43

Comparison of Leading International Maritime Clusters 45

The International Safety Management (ISM) Code 47

The International Ship and Port Facility Security Code (ISPS Code) 48

Professional Associations 48

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

AUTHORS

This Report was prepared by Glenn Murphy, Director of the Irish

Maritime Development Offi ce (the IMDO), in conjunction with

Brian Richardson BE MIEI, an independent consultant.

The authors were assisted by the research and operational team

of the IMDO, Rory McGuire, Kate McHugh, Conor Mowlds,

Rachael Taylor, Victoria Vogel and Meloth Krishnan.

THE IRISH MARITIME DEVELOPMENT

OFFICE (IMDO)

The Irish Maritime Development Offi ce (IMDO) was established

by statute in December 1999. The offi ce is Ireland’s dedicated

development, marketing, and promotional agency for the shipping

and shipping service sectors. The offi ce also has an additional

mandate in relation to seafarer training.

The IMDO has a legislative mandate that includes the following

functions:

To advise the Minister on the development and the ■

co-ordination of policy in the shipping and shipping

services sectors, so as to protect and create employment.

To promote and assist the development of Irish shipping ■

and the Irish shipping services and seafarer training.

To support and market the shipping and shipping ■

services sectors.

To promote registration of ships in the State. ■

To carry out policy as may be specifi ed by the Minister ■

relating to the shipping and shipping services sectors and

seafarer training.

In this context “shipping services” is deemed to include:

Ship Management ■

Technical Management ■

Commercial Management ■

Crew Management ■

Port Activities & Logistics ■

Ship Finance and Mortgages ■

Marine Insurance ■

Maritime Legal Services ■

Ship Broking ■

Ship Chartering ■

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PAGE 4

STRATEGIC REVIEW CONCLUSIONS

Previous Government strategies have brought about signifi cant

growth in all areas of the Irish maritime transport sector – in line

with overall economic performance. The performance of the Irish

economy will continue to affect the maritime transport sector.

In 2008, the Irish Maritime Development Offi ce (IMDO)

submitted a strategic review of the Irish maritime transport sector

(1995-2005) to the Department of Transport. A summary

of the report is outlined in this document. Over the course of

the year, the IMDO engaged with the Department to review a

number of key conclusions and recommendations.

During this period, the state of the domestic and global economies

deteriorated signifi cantly. In response to the key fi ndings of the

report, it has been agreed that the following three priority actions

will be advanced by the IMDO within the parameters of available

resources with the support and cooperation of the Department

of Transport.

1. CLUSTER DEVELOPMENT

Over the past 5 years, a Government supported initiative

to promote shipping services has led to new investment and

employment creation in the services sector. This growth has

been created through both new foreign inward investment

and expansion by indigenous companies. There has also been

an emergence during this period of a prominent number of

dynamic commercial support and service providers in banking,

legal, maritime commerce, ship fi nance and insurance.

This growth has been catalysed by proactive Government policy

and high-level visibility in supporting shipping and maritime

related developments. The current global economic downturn

is likely to see international shipping groups continuing to

consolidate and seek locations that provide a stable and cost

effi cient operating base. Indications are that Ireland is well

positioned to capitalise on the opportunities that the current

market conditions present.

As well as continuing to support indigenous companies, the IMDO

will pursue a strategy of securing further foreign investment with

the support and endorsement of the Department. Additional

resources will be allocated to the specifi c level of business

development activity that will be undertaken by the IMDO.

The IMDO is optimistic that with an appropriately resourced

program and through an assertive targeted development

strategy, approximately 200 new direct jobs could be created in

international shipping services in Ireland over the next 3 years.

2. PORTS PRODUCTIVITY

The IMDO strategic review highlighted the fact that ports are

a critical mode in the total Irish supply chain that enables fi rms

to compete and reach global export markets. The ability of Irish

ports to behave effi ciently and effectively in all aspects and

functions of their work, in facilitating the import and export of

trade, is directly proportional, in part, to the effi ciency of the

total Irish supply chain and a relative indicator of a country’s

economic performance. Performance measurement is an

important tool not only for the port sector but also for applicable

trade organisations, associations and government interests.

Measuring Irish ports productivity should, therefore, be a key

focus in continuing efforts to maximise the effi ciency and

competitiveness of our ports. The IMDO on behalf of the

Department will pursue a programme with the ports and relevant

stakeholders that will lead to a clear picture of how individual

ports perform against agreed measured criteria.

3. RESEARCH & DEVELOPMENT

The IMDO review noted a signifi cant defi cit in the extent of

third level research being undertaken in a coordinated or planned

manner in the transport area. Nonetheless, the review identifi ed

strong pockets of latent research capacity that, if properly funded

and structured, could generate important future research that

would add value to long-term transport policy planning while

also supporting industrial innovation.

A more proactive approach to applied research in the transport

sector will be pursued, initially by the IMDO with the support of

the Department. Future research should include consideration

of how the use of ICT within the supply chain, coupled with

greater effi ciency and transparency of road, rail, maritime and air

transport networks, can provide Ireland with a long term strategic

advantage in competing in globally connected industries.

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

OBJECTIVES

The IMDO was requested by the Minister for Transport to

undertake a strategic review of the Irish Shipping Services

Sector between 1996 and 2005. The Offi ce believes that this

will provide the basis for a strategic platform for the long-term

development of the industry.

Therefore, the objectives of this report are:

To undertake a strategic review of developments in the ■

Irish shipping and maritime transport industry.

Identify trends and drivers globally and in Europe that ■

have had an impact on the Irish shipping industry.

Outline current revised EU state aid policy and the ■

strategies to develop shipping and intermodal transport

in Europe.

Defi ne the structure of the Irish maritime transport ■

cluster and undertake a broad assessment of the relative

performance and growth of this cluster over the last

decade. Identify emerging sectors and how they might

be supported and developed.

SCOPE AND METHODOLOGY

Scope of the Report

This report has been prepared using both primary and secondary

research sources. One of the major diffi culties of writing a report

addressing such a broad and varied range of areas is striking

a balance between covering a topic suffi ciently to inform a

stakeholder and maintaining a report to a certain size. This report

ranges from across an analysis of global, European and local

industrial sectors and their drivers, each area of which may have

required the review of a multitude of corporate plans, industry

reports and cluster research. We have, therefore, employed

a ‘report committee’ structure to decide on the relevance of

information and the level of salient detail required to achieve

this balance. Certain aspects of the report may require a greater

level of detail depending on the topic’s importance to the reader.

However, we refer to appendices and our extensive bibliography

for further in-depth information.

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SECTION 1 THE GLOBAL ECONOMY

& MARITIME TRANSPORT

INTRODUCTION

In section one of this memo we will provide an overview of the

global business environment insofar as it impacts on the world’s

maritime transport industry. Given the size, sophistication, and

range of sectors encompassing the industry, it is obviously beyond

the scope of this section to discuss, in detail, the dynamics that

affect the shipping markets. However, the section will examine

the most salient issues which are set out in the following sub-

sections:

World shipping markets ■

Impact of globalisation on shipping ■

Market growth ■

Ship Registration ■

Maritime clusters ■

Maritime commerce ■

Seafaring ■

Shipping and logistics ■

Port trends ■

Maritime safety & regulation ■

While the focus of this section is on the global shipping industry

it is important to note the size and signifi cance of the European

contribution in the overall global marketplace. This section,

importantly, also places into context the drivers behind recent

national and European Union maritime policy that are examined

in section two.

Many economists generally cite shipping as an industry that

displays the characteristics of a nearly perfectly competitive

marketplace. The ease of incorporation as well as the mobility

of its assets allow a shipping company to maintain competitive

advantage in a way that land-based industries cannot, in

particular given the high costs of relocation.

While centres such as London and Singapore are key international

shipping centres, most economies, island economies in

particular, have a high dependence on the performance and

competitiveness of their shipping, or maritime cluster, and its

contribution to the wider economy. As an island economy this is

particularly important for Ireland.

GLOBAL SHIPPING MARKETS

The world shipping market is a multibillion-dollar industry.

In 2007 it was estimated that the value of the entire freight

market was $450 billion. In addition $80 billion was spent on

new vessels in that year and $15 billion spent on second hand

ships. The top 168 publicly listed shipping companies had a

combined total market capitalisation of $268 billion in 2006.

While the shipping industry has experienced exponential growth

and continues to break all previous profi t, investment, earnings

and growth records, the boom of the past four to fi ve years

comes after a twenty-year period of recession. The table below

shows the increase in seaborne trade for specifi c commodities

over the last 10 years.

WORLD SEABORNE TRADE

Data Source: Clarkson’s world output fi gures(2006)

1200

1400

1600

1800

2000

800

1000

0

Annual Increase

Tonnes

(Million)

600

400

200

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005 (

f)

2006 (

f)

Crude Containers Other Dry Trade Oil Products

Coal Iron Grain Gas

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

Shipping is a diverse industry with numerous market segments.

Clarkson Research separate “shipping” into 3 different classes

of shipping markets (see chart) with each of these market

segments further broken down by ship specialisation and further

still by the ship size. For bulk carriers, as an example, these range

from “Capesize” through “Panamax”, “Handymax” to “Handysize”,

all the way down to a 500gt bulk coastal vessel. At every level

in each segment there are shipping specialists who act as charter

or sale and purchase brokers, fi nanciers, shippers, charterers,

builders, stevedores etc. The various sectors are illustrated in the

chart above.

The industry is constantly evolving. The recent boom has led

to a notable change in the corporate structures used in the

industry. While private companies still dominate the international

marketplace in terms of fl eet size, publicly listed shipping

corporations have grown worldwide over the past four years.

The migration from private to public corporations has also

led to a greater sophistication in the shipping marketplace.

Company shareholders and those who seek to protect them

demand greater levels of transparency and information, while

the shareholder demands a return on investment that often

is achieved through investment in technology, cost reduction,

divestment and/or consolidation, which is what we are now

seeing in the marketplace. The growth in public companies in

the shipping industry is therefore increasing the sophistication

in the marketplace. Many of the contractual and regulatory

issues that the private ship owner can avoid, bind those acting

within a public corporate structure i.e. administrators, lawyers

and fi nanciers.

Maritime transport is the motor that drives other maritimeindustries,

signifi cant in their own right, which ultimately form “Maritime

Clusters”. These service and manufacturing industries range from

shipbroking to ship fi nance, from port operations to shipbuilding.

They form clusters with relative strengths that vary depending on

the competitive advantages present in a jurisdiction or location.

Ireland, as a highly developed service based economy, has much

to offer this increasingly sophisticated market and can benefi t

from leveraging from this global growth.

THE IMPACT OF GLOBALISATION ON SHIPPING

The term “globalization” describes the increased mobility of goods,

services, labour, technology and capital throughout the world.

Globalisation’s effect on shipping and increased world economic

production has resulted in stiff competition, low freight rates,

and a rethink of business strategies by many corporations. This

has made way for the new generation of large vessels coping

with greater journeys across the globe. Many shipping lines have

even reorganised their long-standing consortia associations

(conferences/pools) and embraced mergers and acquisitions.

A typical but restrictive defi nition of “Globalisation” can be

taken from the International Monetary Fund2, which stresses

the growing economic interdependence of countries worldwide

through increasing volume of trade and variety of cross-border

transactions in goods and services, free international capital fl ows,

and more rapid and widespread diffusion of technology. Over

90% of all global trade is transported via the sea and the maritime

industry is intrinsically linked to global trading patterns. While global

production has grown by approximately 6-7 times since 1950,

global merchandise trade has grown by over 100 times and global

manufacturing trade by 200 times with a correlating growth in

the international maritime transport industry.

World output grew by approximately 4% in 2005 and, for the

fi rst time since the 1970’s, the global economy has sustained

a year-on-year growth level of 4% or above for a consecutive

four-year period. In addition, in 2005, and for the fi rst time, the

output of the world’s emerging economies accounted for more

than 50% of world GDP – the rich countries no longer dominate

the global economy.3

2 Alex MacGillivary, “A brief history of Globalisation: the Untold Story of our incredible Shrinking Planet”. Carrol & Graf 2006.

3 “The New Titans”, The Economist, 16 Sept. 2006

TABLE 1: SHIPPING MARKET SEGMENTS BY VESSEL TYPE

1. Bulk Transport 2. Specialised Transport 3. Liner Transport

Bulk Carriers

Crude Oil Tankers

Product Tankers

Combos

Forest Product Carriers

Vegoil Tankers

Chemical Carriers

Gass Carriers

LPG Carriers

LNG Carriers

Reefers

Car/Vehicle Carriers

Ro Ro Carriers

Containerships

Multipurpose Ships

Ro Ro Carriers

Ro Ro Freight Carriers

Ro Ro Trailer Carriers

Source: Clarkson’s Research Services

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PAGE 8

Likewise, as shown in the chart below, with the world seaborne

trade growth during this period reaching 7.11 billion tons in

2005, subsequent increase in tonne miles is evident.

WORLD SEABORNE TRADE 1994 – 2004

Data Source: Fearnley’s Review2004: Annual Report

The entry of China into the World Trade Organisation in

December 2001 has had an important impact on the global

economy. Current trends see the boom in trade driven by these

rapidly emerging economies, principally China and India. Low

cost locations for manufacturing continue to drift eastwards.

The opportunities for maritime transport are obvious, delivering

the bulk of raw materials and basic commodities eastwards and

unitised cargoes of fi nished goods travelling westwards. China’s

demand for raw materials and energy to feed its domestic and

export industries has grown exponentially. Developments in China

are now considered to be one of the most important stimuli to

growth for the tanker, chemical, bulk and container trades. China

has doubled its oil consumption in the past decade. In 2004

Chinese steel imports declined but exports doubled – by 2006

China produced 30% of the world’s steel. It has also become a

global power in shipbuilding. This growth is refl ected in the strong

performances across all the segments of the shipping industry.

It is unsurprising that there is a correlation between world economic

output peaks and troughs and those of the shipping industry.

Ireland, similarly, has experienced the extremes of globalisation

through a combination of economic environment, policy and

timing. Just as the country benefi ted from offering service solutions

to globally trading companies we are also feeling the effects of

competition from jurisdictions that can offer those companies the

same low-cost benefi ts that Ireland can no longer provide. The

recent trend to outsourcing, and relocation of outsourcing, is likely

to continue as costs rise in Ireland.

Ireland can be regarded as a microcosm of the effects of

globalisation in every sense; the development of the Irish

economy will continue to dictate the role of the maritime

transport industry here. Strong growth in the economy will see

a continuation of the impressive demand for maritime transport

services, in return our trading requirements also highlight the

increasingly crucial role the industry will play in maintaining and

enhancing national competitiveness.

MARKET GROWTH

The charts below illustrate the phenomenal rise in earnings

and price of vessels globally. The general trend across all of the

following charts is growth at a signifi cant level. The earnings charts

show the extent to which global Ship-owners are enjoying a

boom with average daily earnings doubling or even trebling since

1996. The charts depict the changes that the shipping sector

has witnessed over the last 35 years. With a major downturn in

the sector during the 80’s, which showed major vessel lay-ups,

the sector has since then seen unprecedented growth. The crude

tanker market took a ten year cycle to recover from the slump.

15000

17500

20000

22500

25000

27500

30000

32500

10000

12500

0

Annual Increase

DW

T (

Millions)

7500

5000

2500

1970

1975

1980

1985

1990

2000

2001

2002

2003

2004

2005 e

st

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PAGE 9

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

CRUDE TANKER MARKET CYCLES

DRY CARGO MARKET CYCLES

Source: Clarkson Research Services.

The same trend is noticeable in the dry cargo market. The

chart below shows the repetition of the cycle but a noticeable

difference is the sudden increase of lay-ups in late 90’s before

regaining employment. This trend was caused by the slowdown

in Asian economies and global demand for goods.

0

DW

T (

Millions)

$/D

AY

20

40

60

80

100

120

140

160

180

200

220

240

0

10

20

30

40

50

60

70

80

Jan: 70

Jan: 72

Jan: 74

Jan: 76

Jan: 78

Jan: 80

Jan: 82

Jan: 84

Jan: 86

Jan: 88

Jan: 90

Jan: 92

Jan: 94

Jan: 96

Jan: 98

Jan: 00

Jan: 02

Jan: 04

Jan: 06

Tanker Lay-Up

Freight Rates

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

0

5

10

15

20

25

30

Jan: 70

Jan: 72

Jan: 74

Jan: 76

Jan: 78

Jan: 80

Jan: 82

Jan: 84

Jan: 86

Jan: 88

Jan: 90

Jan: 92

Jan: 94

Jan: 96

Jan: 98

Jan: 00

Jan: 02

Jan: 04

Jan: 06

Bulk Lay-Up Capesize Bulker

Panamax 1 Year t/c

Capesize 1 Year t/c

120K 150K

DW

T (

Millions)

$/D

AY

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PAGE 10

The charts below show a similar increase to the previous charts.

The weighted average of daily earnings in terms of freight

coincides with the cyclical nature of the sector. The rates have

seen growth and dips through the late ‘90’s to early ‘00’s. If a

base index line is drawn through the peaks, it shows a steady

global growth in demand and supply of commodities and

increase in the shipping sectors.

WEIGHTED AVERAGE EARNINGS ALL TANKERS $/DAY

WEIGHTED AVERAGE EARNINGS ALL BUNKERS $/DAY

As would be expected during a boom for ship-owners, there has

been an increased demand for vessels and a growth in prices.

The following charts relate to the increase in global trade, which

has witnessed increase of demand for ships in the sector.

AVERAGE NEWBUILDING PRICES $/DWT

WORLD ORDERBOOK NUMBER

44,160

49,160

34,160

39.160

9,160

96 97 98

Year

$/D

ay

99 00 01 02 03 04 05 06

29,160

24,160

19,160

14,160

27,240

27,740

22,240

24,740

4,740

7,240

9,740

96 97 98

Year

$/D

ay

99 00 01 02 03 04 05 06

19,740

17,240

14,740

12,240

1,220.00

1,320.00

1,020.00

1,120.00

620.00

$/D

WT

920.00

820.00

720.00

Mar: 9

6

Sep: 97

Mar: 9

9

Sep: 00

Mar: 0

2

Sep: 03

Mar: 0

5

Sep: 06

4,920

5,420

3,920

4,420

1,420

96 97 98

Year

Num

ber

99 00 01 02 03 04 05 06

3,420

2,920

2,420

1,920

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

SHIP REGISTRATION

Shipping, by its nature, is the most mobile industry in the world

today. The desire for lower costs, low regulation and pro-business

jurisdictions led to a market where low or no tax jurisdictions

dominated and still dominate in terms of registered ownership. A

major factor for the industry in its drive to save costs, in particular

tax, and also avoid the cost burden of regulatory compliance in

traditional registries, was the opportunity to relocate. A strategy

where companies shifted the registration of their vessels from

their country of origin gave rise to the colloquial expression

‘fl ags of convenience’ or more accurately ‘open registries’. It

also opened up the possibility that company operations and

management would migrate also.

These countries have been defi ned as follows by the OECD:

“Flags of convenience countries are countries with

favourable tax rules and other regulations attracting part

or whole companies whose main business (originally

shipping, now often production or services) is outside the

country.”4

Today, the most well known open registries are in Panama,

Bahamas, Liberia, Malta, Cyprus (both now in the EU) and

Bermuda.

This paradigm shift in Ship-owning strategy had a major impact

on European and OECD shipping. In 1970, 32% of the world’s

fl eet was under European Flags, but by 1995 this had dropped

to 14%. The drive offshore forced many owners, who would

otherwise have remained in Europe, to follow suit in order to

maintain competitiveness. The movement of the management

structure followed the re-registering of vessels offshore and

many economic blocs were losing the latent expertise of their

industry. As a direct result of this brain drain, many other service

providers, dependant on these shipping companies, also started

to shift their operations to offshore centres to be closer to their

customers. The chart below shows the location of the benefi cial

owners, and their choice of jurisdiction for registration of their

vessels. Greece still leads the global shipping ownership in terms

of deadweight whereas Panama remains the fi rst choice for

fl agging. The Panama registry remains the most competitive in

terms of service and benefi ts to owners.

4 OECD Website: Glossary of Statistical Terms.

WORLD SHIPPING BY BENEFICIAL OWNERSHIP

WORLD SHIPPING BY COUNTRY OF REGISTRATION

Review of Maritime Transport, 2006 UNCTAD

During the 1970s and on into the 1980s, offshore centres

operating benign or zero tax regimes boomed and signifi cant

clusters formed in places like Cyprus, Monaco, the Isle of Man,

Hong Kong and Singapore. In order to protect its ship-owning

base and its maritime expertise, Europe was forced to react

with measures refl ecting the competitive issues in the industry

and the unique problems faced by its complete mobility. These

measures will be discussed in detail in the next Section 3.

18.5

14

6.9

6.8

5.5

5.2

4.9

3.3

3.1

2.8

2.7

2

1.8

1.6

1.5

1.4

1.3

1.2

1.1

Italy

China

Japan

India

Russian Federation

Denmark

Singapore

Taiwan Province of China

United Kingdom

Republic of Korea

Hong Kong (China)

Norway

United States

Germany

Greece

Switerland

Saudi Arabia

Malaysia

Iran, Islamic Republic of

0 5

10

15

20

146

63

41

31

31

31

30

23

23

20

19

14

13

12

12

12

9

9

8

United Kingdom

Singapore

Liberia

Italy

Japan

Norway (NIS)

Cyprus

United States

China

Malta

Hong Kong (China)

Marshall Islands

Greece

Bahamas

Panama

Germany

Korea (South)

Russian Federation

Isle of Man

0

50

25

100

75

125

150

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PAGE 12

MARITIME CLUSTERS

Clusters are ‘Geographic concentrations of interconnected

companies, specialised suppliers, service providers, and

associated institutions in a particular fi eld that are present in a

nation or region’. 5 Shipping Clusters, or Maritime Clusters, fi t this

defi nition extremely well. A ship operator, for example, requires a

multiplicity of ancillary services – specialised fi nance (to fi nance

the vessel), marine insurance (to insure it), staffi ng agencies (to

crew it), technical services, e.g. surveyors (to verify it conforms

to required standards), port facilities (to berth the vessel), ships

agents (to handle the various requirements in port), logistics

operators (for onward handling of cargo), and so on.

These services then have a mutual inter-dependence, the ship’s

agent must liaise with the logistics operators for smooth cargo

throughput, if there is damage, he too will require insurance

services, which will in turn need appropriate technical, surveying

expertise, etc. The various elements that make up a maritime

cluster are interlinked, and once critical mass has been established,

a cluster will (given favourable conditions) generate organic

growth of its own, and this is currently the case in Ireland.

Recognised international maritime centres today include London,

Hong Kong, Singapore, Rotterdam, and Hamburg. Maritime

clusters will include some or all of the following activities: port

operations, logistics, ship owning, shipbuilding and repair and

maritime commerce. These have established themselves for

a variety of reasons, some historical and some as a result of

government development policy and investment. Maritime

Clusters and the structure of their cluster can differ broadly but all

will have had some level of local maritime transport requirement.

All apart from Singapore above are regarded as historical

centres of international trade. The trading expertise, experience,

knowledge, administration and legislation in all services linked

to trade is therefore high and these have, to a greater or lesser

extent, allowed the maritime cluster to develop.

A maritime cluster should be viewed, in the fi rst instance, as

a part of an economic architecture that delivers additional

competitiveness to a national economy and thereafter as

a centre that can add additional value in its own right to the

economy, either from inward maritime investment or outward

expansion. In this situation, Ireland’s maritime cluster rates quite

favourably.

The continuous growth of the global shipping sector and its

appetite for capital presents major opportunities for maritime

clusters seeking to exploit their competitive advantage. In 2005

the Marine Institute undertook a Global Market Analysis. This

estimated that Western Europe accounted for 38% of the world

market with Asia at 24%, as shown in the pie chart above.

5 http://www.isc.hbs.edu/

MARINE COMMERCE – REGIONAL SEGMENTATION 2005 - 2009

Source: Douglas-Westwood, Global Market Analysis March 2005

The role played by government and legislators can have a critical

role in the development of an industrial cluster, as occurred in

Ireland with the development of the fi nancial services sector.

Singapore represents perhaps the most impressive example of

government establishing a specialist environment for maritime

development.

In the appendix, we summarize and compare a number of the

leading maritime clusters globally based on cluster competition

criteria.

Singapore

Singapore provides an excellent example of a modern maritime

cluster. In the early 1960s, the Singaporean government decided

to develop the country as a maritime centre, and made its fi rst

signifi cant move in 1966 with the establishment of its Registry

of Ships.

It can now be compared favourably with countries such as

Norway for the comprehensiveness of its cluster and even with

London for the provision of maritime services. The Singaporean

government has managed the development of the maritime

cluster through various generations, from the days when the

country competed with Hong Kong, Thailand, and China as a

location for low-cost manufacturing of cheap consumer products,

textiles, electronics, etc, to its presence as a world leading fi nancial

services, ICT, and R&D location. The government has encouraged

integrated thinking by ensuring that its own private and public

sector operators are housed together, i.e. the Port of Singapore

Authority, MSA (private), and the Maritime and Port Authority,

MPA (public). It also ensures that communication lines between

its development agency and legislators are short. The Singapore

Trade Development Board is responsible for attracting FDI as well

as encouraging Singapore-based businesses to export overseas

in much the same way as the IDA and Enterprise Ireland. A key

difference is the ability of the Singaporean government to pass

Africa Australasia Latin America North America

Asia Europe/FSU Middle East Western Europe

2%

24%

3%

5%

4%4%

20%

38%

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

positive legislation quickly to counter overseas competitive

threats or take advantage of opportunities communicated to

them through the Trade Development Board.

The following provides a brief overview of Singapore’s maritime

development:

1966 Establishment of Singapore Registry of Ships.

Today, SRS is the largest in Asia and 4th largest in

the world with some 33 million gross tons (GT)

on its register of more than 3,200 vessels.

1980’s The development of an integrated manufacturing

centre resulting in a signifi cant migration

of manufacturing fi rms to Singapore.

2000 Driving a services hub: Liberalisation of service

sectors both at home and in the markets of Free

Trade Agreement partners spurred the growth

of services and other creative industries.

2006 By 2006 Singapore has achieved the

following maritime development:

International hub port ■

Singapore Registry of Ships ■

Base for international ship owners and operators ■

Ship management and agency ■

Maritime training ■

Maritime ancillary services ■

Maritime R&D ■

Ship building & repairs ■

International cruise centre ■

Centre for international conferences & events ■

The maritime cluster in Singapore now accounts for the following:

100,000 jobs ■ 6

Contributes 6% to GDP ■ 7

Directly contributes some US$4.7 billion to the local ■

economy8

Over 3500 maritime related companies. ■

To revert to the Irish situation, the IMDO has undertaken signifi cant

research into the dynamic profi le of global and European maritime

clusters. Some of the initial key summary outputs of this research

are captured in this memo (see Appendix P77). Singapore,

given its similarities to Ireland, the open island economy, small

population, location to signifi cant major population mass, high

FDI success in fi nance, technology and skilled manufacturing is a

particularly interesting model for Ireland to consider in terms of

its future maritime cluster strategies.

6 Opening remarks by Mrs Lim Hwee Hua, Minister of State for Finance and transport, at the “Singapore Nite” Reception, 8 June 2005, Oslo.

7 Singapore Maritime Foundation Website.8 Opening remarks by Mrs Lim Hwee Hua, Minister of State for

Finance and transport, at the “Singapore Nite” Reception, 8 June 2005, Oslo.

MARITIME COMMERCE

“Maritime Commerce” is the preferred term in the maritime

cluster for services related to shipping, its defi nition tends to vary

from country to country but traditionally it includes:

Ship broking ■

Ship management ■

Maritime fi nance ■

Legal services ■

Agency related businesses ■

Effectively, these are the administrative services one would

expect to fi nd specialising in the support of any industrial cluster.

Emerging sectors in freight futures and marine technology now

form a growing part of this sector.

Maritime commerce is of major strategic importance, as a

successful centre tends to attract infl uential decision makers for

many associated maritime activities. London is the world’s leading

centre, but its position is increasingly under threat from S.E. Asia

(particularly Singapore and increasingly Shanghai). However, it

is still the dominant force in world maritime commerce and is

worth particular focus.

London

London is the home of the majority of the world’s shipping and

shipping service associations and one of the world’s most important

centres of maritime commerce. It is an example of a mature

cluster that has developed through hundreds of years of trading,

and whose infl uence extends far beyond its port. This maritime

centre generated overseas earnings of £2.2bn in 2002.9

The principal benefi t of attracting and developing specialist

service activity is to achieve high value-added employment and

indigenous entrepreneurial development. In London, intermediate

and support services to maritime transport (shipbroking, banking,

insurance, legal services, publishing, international organizations,

accounting) account for approximately 14,200 staff.

In the preceding paragraphs, we have outlined maritime clusters,

how they can develop, and we have given two prime examples,

Singapore and London. The factors which affect their growth

and development can vary enormously, and a more detailed

comparison of the two selected centres, along with Cyprus and

Norway, is given in the appendix.

9 Maritime Services, City Business Series 2003. International Financial Services London. (Sept. 2003)

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PAGE 14

In Ireland, there has been very strong growth in the services

sector over the last 10 years albeit from a relatively small base.

The Marine Institute Global Market Analysis concluded that:

”In this growing market there is good potential for

development of the Maritime Commerce sector based in

Dublin with international shipping fi nance as its core”10.

SEAFARER EMPLOYMENT

The last 10 years have seen a signifi cant change in worldwide

seafarer supply. The numbers of seafarers from the traditional

OECD maritime locations of Western Europe, Japan and North

America have declined while there has been a steady increase

from the emerging nations in the Far East, Indian sub-continent

and now Eastern Europe. Of these China, in particular, has

become a signifi cant supplier of maritime labour, although most

of this workforce is currently used by the Chinese-owned fl eet to

meet the country’s expanding domestic requirements.11

The worldwide supply of seafarers in 2005 was estimated to

be around 1,187,000 in total. Of this 466,000 are offi cers,

and 721,000 are ratings12. In its manpower report of December

2005, BIMCO/ISF estimated that the current demand for

seafarers worldwide stands at 476,000 offi cers and 586,000

ratings. When these supply & demand fi gures are put together

they indicate a worldwide shortfall of 10,000 offi cers, or 2% of

the total seafaring population. While the shortage of qualifi ed

offi cers is an industry wide issue, the problem is particularly

acute in the niche trades that operate specialist vessels requiring

high levels of skills & training.

LNG (Liquefi ed Natural Gas) vessels are an excellent example

of a developing niche market. New vessels cost $200 – 400m

each, and due to the nature of their cargo, a high degree of

competency (rather than cost) is the paramount consideration in

appointing their offi cers.

As world energy markets evolve, there is a growing need for such

vessels. In 1998, there were orders for 20 new LNG carriers.

By 2006, the number of orders had increased to over 120 – a

more than six-fold increase. We believe that this is an excellent

example of opportunity for high quality training for Irish seafarers.

In addition to trade- and vessel-specifi c shortages, there are

shortages in certain ranks, specifi cally senior ranks, with early

retirement being a dominant factor in many countries13.

10 Douglas-Westwood, Global Market Analysis March 2005.11 Clarkson China Intelligence Reports, 2006.12 BIMCO/ISF Manpower Update 2005.13 BIMCO/ISF (Ibid).

AGE STRUCTURE/OECD OFFICERS

Figure 1 Age Structure of OECD Offi cers, 1990 - 200514

The prospects of increased demand and diminishing supply

present an unfavourable situation for the world’s maritime industry

for the future. When viewed from an Irish context however, these

conditions present signifi cant opportunities both for Irish offi cers,

and for Ireland, as it seeks to establish a reputation as a centre

of excellence for maritime training.

SHIPPING & LOGISTICS

Shippers today require sophisticated seamless, integrated,

transport solutions to deliver competitive advantage to their

businesses. In addition to sea and land transport, this includes

air transport, warehousing, freight forwarding, electronic tracking

and tracing, and break bulk/LCL services.

Major shipping companies are all widening their services –

Maersk, NYK, Cosco, Hapag Lloyd and DHL all operate airlines

for example – and are integrating the third party logistics (3PL15)

services vertically into their business.

The top ten are listed in the following table, with the location of

their Irish operations (in fact 18 of the top 20 companies have

Irish operations), and these companies were reported to have

moved more than 0.5m TEU in 2004. These top 10 companies

are truly global entities, with turnovers in excess of $4 billion

each. The two largest had a combined turnover of more than

$23 billion in 2004.

14 BIMCO/ISF (Ibid)15 3PL: “An organization that manages and executes a particular

logistics function, using its own assets and resources, on behalf of another company” Source: Eyefortransport.com.

40%

50%

0

Year

% S

hare

30%

20%

10%

1990 1995 2000 2005

>31 31-40 41-50 50<

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STRATEGIC REVIEW OF IRISH MARITIME

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INTERNATIONAL TOP LOGISTICS PROVIDER

Company Country of

Origin

Irish

Operator

ABX LOGISTICS Belgium Dublin

APL Logistics USA Dublin

CH Robinson USA Dublin

DHL Global Forwarding Germany Dublin

DSV (DFDS) Denmark Kildare

EGL USA Dublin

Expeditors USA Dublin

FedEx USA Dublin

Hellmann Worldwide

Logistics

Germany Cork

Kintetsu World Express Japan Dublin

Source: IMDO and Individual Company Data.

In the face of this global trend towards integrated logistics, our

research appears to indicate a gap in Ireland in integrated policy

planning with this sector and other inter-related sectors. There

is however a greater recognition by the European Commission

of the value of these sectors to the European maritime supply

chain with the growing importance of integrated development

measures such as Motorways of the Seas, Marco Polo and the

recent Freight Logistics communication, all of which we cover in

Section Three.

GLOBAL PORT TRENDS

Ports are an intrinsic element of the shipping process and their

importance can have a regional, national and international

impact. As we highlighted earlier they have, historically, been the

physical centres of trade and, for the most part, remain so.

The following is a very brief overview of global and European

development from a ports perspective, some of which are policy

driven and aimed at improving port performance. There are also

references to recent major port developments within Europe and

their relevance to Ireland.

There are two main trends in port activity worldwide at the

moment:

Integration of port activity into the overall logistics chain ■

Capacity challenges in container traffi c ■

Port Integration

Twenty port terminal operators control signifi cant levels of the

top fi fty ports in the world, and these ports in turn handle a large

percentage of ocean-borne freight. Some of these companies

such as P&O Ports, Maersk, CMA-CGM, Cosco and Evergreen

also control a large percentage of the global cellular container

fl eet. The trend to vertical integration amongst liner operators

over the past decade has been noteworthy, with an ever-

increasing desire by these companies to control larger amounts

of the total supply chain. There have been high levels of merger

and acquisition activity in this sector, a trend that many experts

expect to continue. Ports are viewed as considerable economic

and strategic assets by the market.

Container Traffi c Demand

Container shipping capacity is growing faster than the capacity of

many ports to receive them. Concerns have been expressed as

to whether the European container terminals and their hinterland

connections can adequately adjust to this continuous growth.

Initial fi gures from Rotterdam show a 16% surge in container

traffi c to 8.3 million TEU in 2004 and Hamburg has achieved its

fi fth year of double digit growth. US ports are also experiencing

severe congestion.

In addition, there are serious restrictions in Europe to the number

of ports that can handle the new mega-container ships –

10,000 TEU and upwards.

The result is a very large investment in expanding port capacity

worldwide. For example, Shanghai is spending $10bn in building

what it expects to be the world’s largest container port. Kuwait is

to build a $1.2bn container port becoming operational in stages

from 2008. Spain has announced a plan to spend ¤23bn on the

maritime and ports sectors over the 15 years to 2020. New York

invested a total of $1.7bn since 2005.

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PAGE 16

The charts below show the increase in container freight rates

including the delivery of vessels in the sector. The container

trade has seen a global shift in the size of these vessels, which

have now gone over 10000 TEU (Twenty-foot Equivalent Unit)

capacity level.

CONTAINER CHARTER RATES

CONTAINER DELIVERIES

In Europe, Rotterdam has recently secured its permission

to commence the Masvlaakte II project – 1000 hectares of

additional containers capacity, Antwerp will also see the port

double its capacity from 6 to 13 million TEUs over the next 5

years, and the London Gateway schemes has received preliminary

approval in the UK (Sept 2005), to add a further 6.8 million

TEUs capacity. Other developments in the Liverpool, Bristol and

Teeside are also planned.

MARITIME SAFETY & REGULATION

Maritime safety and Regulation is a vast area which would merit a

substantial study in its own right. There are numerous international

conventions and agreements which must be enforced by the

appropriate national authorities, and in many cases must be

refl ected in national legislation. The cumulative effect of these

measures has been above all to approve safety at sea and to

reduce the risks of pollution. To achieve these aims, they impose

increasing responsibility and workload, both on the national

authorities to defi ne and implement the appropriate measures,

and on the operators (port authorities, shipping companies, etc.)

to implement them in an equitable and transparent manner. While

Maritime Safety and Regulation are not the focus of this report,

it is worth drawing attention to certain developments which have

taken place over recent years.

There have been changes resulting from casualties that have drawn

international attention and concern. The IMO has sought to regulate

international shipping through the development of international

treaties, conventions and codes. The global shift in attitude is towards

leveling the operational fi elds for shipping companies whilst raising

the health, quality, safety, environmental and security standards. The

main issue continually being advanced is crew welfare and training.

With introduction of new legislation and conventions, there is a

growing drive to maintain high training standards.

Non-compliance with the international regime has become

increasingly less viable as the repercussions can be severe. The

key priority in the maritime sector is to ensure that all countries

meet and maintain compliance with international conventions,

including the ISPS16 Code and STCW-9517, thereby maintaining

regional security, and also for trade, tourism, infrastructure, service

delivery and employment. Recent and major changes introduced

to the industry include the implementation of ISM18 in early 90’s

and the ISPS code. The Oil Companies International Marine Forum

(OCIMF) has also recently introduced the Tanker Management Self

Assessment (TMSA), under which all tanker owners will need to

establish additional documentary processes to co-ordinate their

management operations effectively. The TMSA shall cover the areas

of Change management/Risk management and Accident/Incident

analysis. This system shall also record any non-conformance and

defect management and closeout requirements, circulars, safety

bulletins and procedural changes etc.

16 ISPS Code: International Ship & Port facility Security Code. Brief overview is in the appendix

17 STCW-95: International Convention on Standards of Training, Certifi cation and Watchkeeping for Seafarers, as revised in 1995

18 ISM Code: International Safety Management Code. Brief overview is in the appendix

20

25

30

35

0

Year

% S

hare

15

10

5

650-750 TEU

1650-1750 TEU

1000-1100 TEU

Jan: 93

Jan: 94

Jan: 95

Jan: 96

Jan: 97

Jan: 98

Jan: 99

Jan: 00

Jan: 01

Jan: 02

Jan: 03

Jan: 04

Jan: 05

Jan: 06

12%

14%

16%

18%

4%

Year

% o

f Fle

et

OO

O T

EU10%

8%

6%

400

500

600

700

800

900

1000

0

300

200

100

% of Fleets Deliverys

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

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STRATEGIC REVIEW OF IRISH MARITIME

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CORPORATE RESPONSIBILITY & RISK MANAGEMENT AREAS

The diagram above lays out how the industry has witnessed

legislative changes and why it is crucial for operators and

owners to maintain clear transparency of their assets and

dealings. Under the corporate governance issues, shipping

companies need to refl ect their commitment to environmental

issues and how they operate, in an ethical manner. This

backdrop of changes has in itself created a new service sector

catering to these changes and led to standardization across

global markets.

Environment ISO 14000

MEPC

> Ballast Water

> Ship Recycling

> GHG

WETREPPSSA

> Marpol

> ISM

Operations

Corporate

Performance

Standards

ISO 9000/2000

SafetySIRE OHSAS

18001 TMSA

> ISM

> SOLAS

> COLREG

> IMDG

> SAR

> SUA

SecurityISO PAS 28000

ISO PAS 20858

> ISPS

> AIS

Corporate

Governance

Corporate Transparency

GRI Reporting

> IMO CONVENTIONS

> SARBANES-OXLEY

> ISM

Staff & Crew

WelfareSA 8000

(ISO 26000)

> STEW

> ISM

> CONMARCON

Maintenance

> MSC Resolutions

> STCW

> MCA

> MGN

Corporate

Maintenance

Program & PMS

TMSA

Source: HMA Maritime, Oslo ‘Mare forum Shipping Conference’ presentation 2006

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PAGE 18

CONCLUSIONS

The shipping industry is wide and diverse and at times highly cyclical. In spite of this cyclical nature, global trade output ■

has never decreased. It is a truly global industry and is affected by the impacts of globalisation, world economic outputs,

global recession, war, and currency risk and oil prices.

Different countries have different approaches to developing and supporting their maritime transport clusters. Furthermore ■

many countries have different approaches to collating and analysing the economic performance and value of these sectors.

The industry is also highly mobile and is continually seeking locations that offer stable, pro-business environments and ■

benign tax structures.

Availability of capital and pro-business investment structures are key sources to growing high value service clusters, in ship ■

fi nance and banking.

The leading shipping clusters are London, Oslo, Hamburg, Rotterdam, Hong Kong, Tokyo, Singapore and most recently ■

Shanghai. Offshore locations in Monaco, Cyprus, Isle of Man have emerged in the 70s ad 80s, and gained prominence in the

last decade. There is a high level of competition between these clusters for varying physical and service-based industries.

The forces and change drivers within the global industry have required the European Union and OECD countries to ■

introduce specifi c fi scal and regulatory measures to protect their maritime cluster base(s) and also to enable European

Ship-owners compete with lower cost offshore centres.

Ireland has no real track record as a major shipping centre, although in the past 6 years it has developed some competitive ■

advantages and has potential to compete for inward investment projects in some niche market segments, in particular the

banking sectors.

The globalisation of production, upward growth in containerisation, faster- larger ships, greater emphasis on supply chain ■

management, and effi cient freight and logistics movements are all factors that will impact on Ireland.

Maritime Safety and Regulation places increasing demands on the relevant national authorities to defi ne and police ■

measures, and on operators to implement them.

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SECTION 2 KEEPING EUROPEAN

SHIPPING AFLOAT

INTRODUCTION

This section examines how the world trends outlined in Section

1 have affected the Maritime Market in Europe. In particular it

looks at the response by the EU to the decline in the European

Shipping Industry and the individual measures it has introduced

or permitted, (and their applicability in Ireland).

It concludes with a brief overview of current legislative thinking

from the European Commission, mainly:

Green Paper on Maritime Transport ■

Mid Term Review of the current White Paper ■

The Commissions Communication on Freight Logistics ■

ECONOMIC PROFILE OF SHIPPING IN EUROPE

Shipping and maritime transport services is the largest sector

in the European maritime cluster, with an estimated 10,000

companies operating a across a diverse range of services. The

sector generated an annual turnover of ¤151 billion in 200419.

In Ireland the shipping and maritime transport sector is also the

largest component of the marine services industry, employing

directly 8,300 people in maritime services with an estimated

turnover of ¤1.5 billion in 2005.

There is a renewed optimism that Europe is regaining its position

as a leader in shipping services and this is supported by the

fi gures in the pie charts below.

From an economic position, recent European maritime policy has

placed a far greater emphasis on the important role that shipping

plays in the European community. It takes into account that

90% of EU external trade and over 40% of its internal trade is

transported by sea20. These numbers correspond to 3.5 billion

tonnes of goods and 350 million passengers per year.

Europe depends and will continue to depend on this mode of

transport and on the unhampered fl ow of maritime traffi c. It

would appear that with globalisation and greater competition,

in particular from emerging economies in Asia and the Indian

subcontinent, there is a greater need to ensure that Europe’s

main trading and shipping supply lines stay competitive. The

following pie-charts show that Europe accounts for a signifi cant

proportion of the world’s traded goods and services.

19 European Chamber of Shipping (2006)20 Green Paper “Towards a Future Maritime Policy for the Union

7.6.2006: Com (2006) 275 Final

WORLD TRADE BY GEOGRAPHIC AREA

Source: www.eurostat.ec.europa.eu/trade balance (2006)

Shares in World Trade in Goods (2005)

EU25 United States Japan

China Others

17.5%

17.2%

7.0%

49.4%

8.9%

Shares in World Trade in Services (2005)

EU25 United States Japan

China Others

26%

18.4%

6.9%

44.9%

3.8%

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PAGE 20

The following chart show the trade balance for Europe and how

globalization has affected specifi c sectors.

TRADE BALANCE (BILLIONS OF EUROS)

United Nations Conference on Trade & Development Geneva Review Of Maritime Transport, 2006

THE FALL AND RISE OF EUROPEAN SHIPPING

The resurgence in the maritime industry in Europe comes

against a backdrop of sharp decline. In 1970, 32% of world

tonnage was under EU fl ags, but by 1995, this had declined to

14%21. During the same period, the share of major open registry

countries had increased from 19% to 38%22.

As discussed in section two, the emergence of offshore shipping

locations, offering zero tax and benign regulatory environments,

created signifi cant competition for the location of the shipping

industry.

Given the mobility of the industry, a large number of companies

and shipping service providers relocated out of Europe and

there was a steady drift of the EU fl eet towards ‘fl ags of

convenience’.

21 Cap Gemini Ernst & Young, Marine Institute: Developing Ireland as an Internationally Competitive Location for Shipping and Shipping Related Services. July 2000

22 Community Guideline on State Aid to the Maritime Sector: 1997

The effects in the EU were harsh, particularly for employment:

the number of EU seafarers employed on EU-fl agged ships fell

by 37% in the space of ten years (1985-1995), while the

number of seafarers from non-EU countries rose by 14% over

the same period. 51% of job losses are thought to have been

due to fl agging out. The decline in shipping in Ireland over this

period is almost a mirror image of the trend that took place at

European level.

In 1997, the European Union issued a revised version of its

1988 State Aid Guidelines to Maritime Transport. The Guidelines

are widely credited with halting the decline and reversing the

migration of shipping services. Today the EU fl eet has a signifi cant

share of the global market, with 8,690 ships under European

fl ags, totalling approximately 225 million deadweight tons.

The EU share of world tonnage is currently 23%. In addition,

it provides employment to some 190,000 European seafarers,

making the European Union the number one shipping power

in the world.23The EU also recognises that European-based

shipping companies control a further 3,500 vessels fl ying foreign

fl ags. The graph below shows the world tonnage distribution and

European share. The European tonnage has since 2004 seen

a slow decline due to a lack of competitive schemes to retain

ownership in the EU.

WORLD/EEAA TONNAGE DISTRIBUTION

United Nations Conference on Trade & Development Geneva Review Of Maritime Transport, 2006

23 European Commission – Maritime Affairs Division 2006

57

136

3

21

30

60

40

64

26

36

5

4

6

8

6

8

0

8

Chemicals

Machinery

Other Products

Non-metal Mineral Manuf.

Paper and Articles of Paper

Iron and Steel

Textiles and Clothing

Transport Equipment

Manufacturing

1999

2004

World EEA

EEA% of World’s Tonnage

6000000

7000000

4000000

5000000

0

1990 2000 2004

Year

Tonnes

(Million)

2005 2006

3000000

2000000

1000000

25.0

30.0

20.0

0.0

15.0

10.0

5.0

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PAGE 21

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

In 2004, the European Commission further revised its State Aid

Guidelines to Maritime Transport, seeking to reinforce Europe’s

position as a signifi cant force in global shipping. The reinvigorated

maritime industry in Europe has grown since 2000, and there

are a number of reasons for this:

Organic growth of the industry, ■

A boom in world-wide shipping markets, ■

The policy focus by the European Commission, ■

The enlargement of the Union’s industry with the signifi cant ■

maritime clusters of Cyprus and Malta.

In addition, the EU seafaring base has also been boosted with

the accession of a number of states with strong seafaring

traditions and abundance of skilled workers, including Poland,

Latvia and Estonia.

Maritime transport and ports are recognised as key elements

in the logistics chain linking the single market to the world

economy. Their effi ciency is crucial to the competitiveness of

the EU and it is no surprise that shipping services and ports are

identifi ed as growing sectors and as key elements of the Lisbon

Policy which aims to make Europe the most competitive trading

entity in the world.

The European Commission State Aid Guidelines to Maritime

Transport are a key element of European maritime policy, in

particular in the context of competition and infl uence on market

forces. Therefore, in line with these provisions, we will review:

The latest measures outlined under the recent guidelines ■

with respect to their policy impacts on shipping in Ireland.

The higher focus placed by Europe on promoting ■

competitive internal shortsea shipping and the most recent

initiatives in that regard.

We will briefl y refer to ports policy in Europe. ■

Examine the publication of the Green Paper on Maritime ■

Policy, again from the perspective of its potential

contribution to shipping services in Ireland.

EUROPEAN STATE AID GUIDELINES

TO MARITIME TRANSPORT

The Commission recognized that, while there has been a positive

recovery in the European Fleet since the initial introduction of the

State Aid measures in 1997, an ongoing commitment is required

by Europe to maintain a long term, sustainable, maritime base.

It is accepted that European owners still need special fi scal

measures to make European shipping and the employment

of European seafarers competitive and the position in Ireland

refl ects this.

The Commission recognizes the emergence of competing

maritime clusters, particularly in Asia. These emerging clusters

compete not only in terms of location costs but also, and more

signifi cantly, in terms of innovation, research, fi scal policy, and

transparent, fl exible, regulatory environments.

In 2004, the Commission offi cially introduced the new Guidelines

on State Aid to Maritime Transport. These guidelines follow the

same approach as the 1997 version and maintain the same

over-riding proviso that

“a reduction to zero of taxation and social charges for

seafarers and corporate taxation of shipping activities is

the maximum aid which may be permitted”24

The 2004 guidelines reinforce the importance of monitoring

the effects of state aid, and also provide new guidance on tax

exemptions rules for seafarers and public support to Short Sea

Shipping.

The EU’s revised state aid guidelines seek to maintain

competitiveness in an international business environment. The

new framework continues to allow Member States to support the

European maritime industry by means of favourable tax regimes

while ensuring a level playing fi eld in the internal market.

While the new guidelines provide a positive fi scal environment,

they fail to stimulate a higher level of innovation or dynamism in

European shipping. However, the recently published Green Paper

does provide an opportunity to create such a framework.

The following are the measures currently approved under the

State Aid Guidelines, with the corresponding status for Irish

Initiatives.

European Measure Irish Status

Fiscal treatment of ship owning

companies (tonnage tax systems)

Irish tonnage tax

introduced

Labour-related costs:

Reduced rates of ❚

contributions for social

protection of community

seafarers;

Reduced rates of income ❚

tax for community

seafarers;

PRSI refunds for

employers introduced

Seafarers Additional Tax

Credit introduced

Crew Relief (repatriation costs) No

Investment Aid No

Regional aid No

Training (on-board) Yes, ISEAS

Restructuring aid No

Public services obligations and

contracts

No

Short sea shipping One Irish company has

received funding under

Marco Polo

24 Community Guidelines on State Aid to Maritime Transport

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PAGE 22

The following is a brief review of the European measure in

relation to Ireland.

Fiscal treatment of ship-owning companies – Tonnage Tax

In December 2002 the European Commission approved Ireland’s

tonnage tax regime. Most other EU countries have introduced

tonnage tax regimes.

Rather than paying corporation tax on operational profi ts, tax is

paid on a notional amount determined by the tonnage owned/

bareboat-chartered and time-chartered by the company.

Depending on the fl eet size, type and fi nancial structure,

corporation tax rate for a ship operator can amount to a zero rate

(the lowest permitted under the current Guidelines)

Labour-related costs

In 2005 The European Commission approved the Ireland’s

scheme for the reimbursement of pay related social insurance

contributions for Irish seafarers for a period of 7 years.

In addition, there is currently a personal tax-free allowance of

¤6,350 for certain seafarers.

While Ireland has not formally sought any additional relief for its

seafarers, the rules further permit:

Reduced rates of income tax for EU seafarers on board ■

ships registered in a member state.

A reduction to zero of personal income tax and social ■

insurance charges.

At a time of signifi cant readjustment in the seafaring sector,

all options should remain open and be reconsidered by the

Government following a periodic review of the seafaring sector.

On-Board Training

The Commission has recognised the cost burden to European

ship-owners of cadet and offi cer training. Several member states

have introduced special support measures for their industries.

France, Italy and the United Kingdom have the largest training

budgets amongst the EU states. It is the Commission’s view that

“given the importance of such activities to the economy of the

Community and in support of earlier stated objectives, these

types of fi scal incentive measures can generally be endorsed”.

Through the administration of the seafarer training scheme,

ISEAS, Ireland provides a direct training support for seafarers of

about ¤365k annually.

Short Sea Shipping (SSS)

There are two major initiatives to develop Short Sea Shipping

in the EU. These are Motorways of the Sea (MWS ) which

promotes major maritime corridors between member States, and

Marco Polo which favours modal shift away from road freight.

Motorways of the Sea (MWS)

In its Transport White Paper of September 2001, the EU

Commission proposed the development of “Motorways of

the Sea” – MWS – as a “real competitive alternative to land

transport.” To help these lines develop, European funds would be

made available. These MWS will be part of the Trans European

Network – TEN-T’, and initially four corridors were designated

Baltic Sea (Member States in the Baltic Sea with those in ■

Central and Western Europe).

Western Europe (Iberian Peninsula to the North and Irish ■

Seas).

South East Europe (Adriatic, Ionian Sea and the Eastern ■

Mediterranean).

South West Europe (Western Mediterranean, and linking ■

with the South-East Europe, above).

A minimum frequency of service is stipulated, and there is a

requirement for streamlined administrative procedures at the

point of landing.

The focus of MWS programmes is to link member states, to

develop infrastructure, and projects must be proposed at joint

national level by a number of member states. To date no

projects have been approved for EU funding. However, there

are projects under study where Cork or Rosslare would feed into

developments as part of the Western European MWS.

Marco Polo

The Marco Polo programme was established to reduce

road congestion by promoting modal shift to rail, short sea

shipping, and inland waterways. The programme is available

for all international transport. Initially, a budget of ¤115m for

the period 2003 – 2007 was made available to grant aid the

infrastructural and other developmental costs of suitable projects.

Under Marco Polo, suitable projects can be proposed by the

operating companies – usually a lead proposer, with international

co-benefi ciaries also listed.

The programme has been a success, and has been heavily

oversubscribed. Its successor, Marco Polo 2 is planned to run

from 2007 – 2013, and will have a budget of ¤740m, and is

designed to be more accessible for smaller projects.

The funding allocations for 2003 and 2004 have been published

and are summarised in the following table.

Marco Polo Call ¤Amount

2003 21,120,000

2004 20,439,000

Total 41,559,000

Irish Interest26 1,000,000

Irish Percentage 2.5%

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PAGE 23

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

A number of points are of interest:

31 projects have been grant-aided to date – 19 in 2003 ■

and 12 in 2004.

Four Irish projects were submitted, and one was successful ■

– Project Eucon. The Irish Continental Group was the lead

company, with benefi ciaries in France and the Netherlands.

In none of the other thirty projects did Ireland feature as a ■

benefi ciary.

CURRENT STATUS OF EU POLICY

Currently, three EU policy assessments indicate the current

thinking by the Commission on maritime transport matters,

namely:

Green Paper on Maritime Transport. ■

Mid Term review of the Current White Paper. ■

The Commission Communication on Freight Logistics. ■

EU Green Paper on Maritime Transport

In June 2006, the EU issued a Green Paper on the Future of

Maritime Policy for the Union25, acknowledging the important

role that shipping plays in the European Community, and calls

for attention to enhance the competitiveness of the industry.

Although it doesn’t defi ne the “industry” nor the extra policy

measures to achieve this, it is encouraging that the Green Paper

recognises the importance of the maritime dimension of Europe

and its economic potential. The Paper stresses the essential role

of shipping services for the European economy and for the daily

life and the wealth of EU citizens.

Amongst its observations are:

Forty percent of the EU’s internal trade is transported by ■

sea.

There is a decline in the number of merchant marine ■

offi cers, yet many sectors require a steady fl ow of former

seafarers.

“A strong Maritime Community in Europe is an essential ■

condition for the well being and development of maritime

transport. Given the high degree and the interdependency

of all players in the sector, a change in fortune in any one

industry will infl uence others”.

The Green Paper also recognises that the European ■

maritime clusters are the largest in the world and that

maritime transport is the catalyst for the maritime clusters.

25 “Towards a Future Maritime policy for the Union: A European Vision for the Oceans and Seas”; COM (2006) 275 – Commission of the European Communities

Mid Term Review of White Paper

On 22 June 2006, the Commission approved a communication

on the mid-term review of the 2001 White paper on European

Transport Policy26. In the latest agenda the overall objectives of

transport policy were confi rmed, notably a competitive, secure,

safe and environmentally-friendly mobility, fully in line with the

revised Lisbon Policy agenda for employment and growth.

The mid term review identifi ed that the growth of effi cient and

sustainable transport is considered essential. This is obviously

an important consideration from Ireland’s position. Particular

attention is drawn to the previously highlighted areas:

Growth of short sea shipping. ■

Requirement for investments in ports and hinterland ■

infrastructure.

Development of a strategy for freight transport logistics. ■

Modal shift should develop on the basis of optimising the ■

performance of the relevant transport modes.

The Commission Communication on Freight Logistics

The revised White Paper on Transport Policy was followed by the

publication of a Commission Communication on Freight Logistics

on 28 June 2006. The Communication will be the basis for an

Action Plan for Freight Transport Logistics, which is expected in

2007. The Communication proposes, amongst other items, to

set up a group of National Focal Points to identify and solve

bottlenecks that hamper the development of freight transport.

It also proposed to:

Improve tracking and tracing of freight movements in the ■

Union.

Build logistics terminals and, ■

Establish a dedicated rail freight network. ■

Furthermore, it envisaged the harmonisation of transport

documents and liability regimes for the transport modes. It is

imperative that Ireland forms a position with respect to this

paper.

26 European Transport Policy for 2010: A Time to Decide; COM (2001) 370

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PAGE 24

CONCLUSIONS

The Policy framework developed through the European State Aid Guidelines and the White Paper on European Shipping ■

has had a positive impact on European shipping and thus on Irish shipping.

Policy & fi scal developments in Europe require constant monitoring in order to ensure that the Irish industry is not at a ■

competitive disadvantage relative to its closest trading and competing neighbours.

The Green Paper for maritime transport provides an important platform to pursue a national strategy on cluster ■

development consistent with the European Commission’s objectives and the Lisbon Agenda.

Maritime Transport is seen increasingly by the EU commission as a link in an overall logistics Process. The defi nition of ■

Motorways of the Sea, and the mid-term review of the current White Paper, and the 2006 Communication on Freight

Logistics all refl ect this.

The policy drive by the EU to transfer freight from road to water is likely, in the future. ■

Ireland has secured less than 1% of maritime transport research funds from previous European research programs. The ■

forthcoming FP7 program is an area where Ireland should aim to secure more funds for research projects and partnerships.

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PAGE 25

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

SECTION 3 THE IRISH MARKET

INTRODUCTION

In the previous sections we provided an overview of both the

world and EU marketplace, including the effect of globalisation,

regulation, and the infl uence of European and wider policy. Ireland

is also amongst the fi ve most open economies in the world.

Because of its geographic location, Ireland is heavily dependent

on its ports and shipping corridors to connect national industry

to the global market place. The importance of international trade

to the Irish economy cannot be overstated and it is generally

accepted that the export sector has been a major driving force

in this development.

In this section we look at the Irish maritime marketplace and

how some of the broader global issues have affected it. This is

followed by a brief consideration of some of the developments

facing the industry, and the conclusions that can be drawn on

the Irish market. We examine the key components of the Irish

Maritime cluster and attempt to defi ne the principal segments

of this sector.

We will provide a profi le of the national maritime transport

cluster and how the cluster is adapting and developing to the

needs of the Irish economy. This section will also take account

of current and future constraints resulting from rapid economic

development and the position of maritime transport in an open

island economy increasingly infl uenced by the global economy.

In this section we examine:

Economic overview and competitiveness. ■

The industry profi le. ■

The Irish maritime cluster, and its components. ■

Core services. ■

Liner and Short Sea Shipping services. ■

Agency & Support services. ■

Maritime commerce. ■

Freight & logistics. ■

Knowledge and innovation. ■

Government regulation. ■

Professional bodies. ■

New Horizons – future challenges. ■

ECONOMIC OVERVIEW

Ireland is amongst the fi ve most open economies in the world,

and is therefore heavily dependent on its ports and shipping

corridors. The importance of international trade to the Irish

economy cannot be overstated and it is generally accepted

that the export sector has been a major driving force in this

development.

THE IRISH ECONOMY & WORLD SHIPPING

Table 1.1 2005 2006 2007

Irish GDP Growth 5.5 5.6 5.2

Irish GNP Growth 5.4 5.6 5.1

Global GDP Growth 4.5 4.25 4

Global Dry Bulk Fleet Growth 6.7 5.7 3.8

Global Wet Bulk Fleet Growth 7.6 5 6.5

Global Containership Fleet Growth 10.6 12.7 11.5

During the period 1995-2004 the value of the Irish Gross

National Product (GNP) at current market prices, expanded from

¤47 billion to ¤124 billion.27 There has been unprecedented

growth for almost a decade, and following the global slowdown

of 2001/2002, this softened to the more modest rate of

4-5%. The growth rate for 2005 was 5.5%, with the same

level forecasted for 2006.

There is a correlation between economic growth and the demand

for maritime transport, and the following diagrams clearly show

how the performance of the economy is closely shadowed by a

similar trend in container traffi c, both Lo-Lo and Ro-Ro.

GDP AND RO-RO TRAFFIC GROWTH

GDP AND LO-LO TRAFFIC GROWTH

Source: CSO

27 Indecon Reports on Irish Ports 2006.

120000

140000

160000

180000

80000

100000

0

Year

€ M

illion

No. of

Tra

ilers

60000

40000

20000

600000

700000

800000

900000

400000

500000

0

300000

200000

100000

1998

1999

2000

2001

2002

2003

2004

2005

GDP

RORO

120000

140000

160000

180000

80000

100000

0

Year

€ M

illion

TEU

s

60000

40000

20000

1200000

800000

1000000

0

600000

400000

200000

1998

1999

2000

2001

2002

2003

2004

2005

GDP

LOLO

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PAGE 26

It is important to note that with the continuous increase of

volumes of goods moving into and out of Ireland, the demands

on the maritime transport infrastructure, including the public

sector element, are also increasing.

COMPETITVENESS

Competitiveness has become something of a global

preoccupation and certainly a national preoccupation in Ireland

since the early 1990’s. It is a central theme to this report.

Its attainment is necessary to underpin the future of the Irish

maritime cluster. It can be defi ned in a narrow or broad sense.

Today Ireland has moved towards accepting the broad defi nition

of competitiveness. This is generally accepted to mean “including

price and non-price factors such as product quality, reliability of

supply, back up marketing services and taxation and extends to

consideration of human resource development, business services,

infrastructure and public fi nance and administration. A country’s

long term competitive position can also be profoundly infl uenced

by its policy towards research and development (R&D) and by its

success in product innovation and technology”.28 We believe that

this clearly refl ects the approach advocated by this section of

the memo and the development methods pursued by the IMDO

and sector in search of achieving economic competitiveness.

The Irish shipping services is only one element of overall

competitiveness. Although transportation costs might allow

fi rms from a nation to compete successfully in their home

market or in adjacent markets, competitiveness usually refers

to advantage obtained through superior productivity. However,

competitiveness should not be seen as a means to an ends in its

own rights and other factors such as improved performance and

quality of services are also highly important.

The Forfas Annual Competitiveness report, identifi es transport

infrastructure as a key component of national competitiveness.

However it does not in our opinion clearly refl ect the important

role that Ports, Shipping and supply chain plays within the

competitiveness of an island economy such as Ireland. It is a

globally accepted phenomenon today, that supply chains and

not companies compete for business in the international market

place. As an island economy, we are at least one step in the

chain further removed from our customer base . These costs

can be as high as 20% of the total sales and delivered cost of

a product. Failure to compete in the supply chain will inevitably

mean that Irish companies will not be competitive.

28 Economics for Business, Prof Dermot McCallese, Trinity College Dublin, Press 2004.

INDUSTRY PROFILE

In 2005 the IMDO participated in an Industry Health Check carried

out by the Marine Institute and economist Peter Bacon, to provide

a wide-ranging survey and assessment of the Irish Marine Industries

Portfolio (MIP), which included the fi shing and aquaculture sectors.

The review determined that the turnover of the total portfolio was

about ¤3 billion per annum. The review attempted to provide as

accurate a fi gure as possible of the size of the MIP by fi rst identifying

all companies providing maritime specifi c services, either wholly or

in part, and to quantify the revenue, employment, government

support and outlook for them.

Given the size of the task and the resources available the scope

of the research was restricted and certain rules applied to the

data:

Access to corporate data was variable and public turnover ■

data was not readily available for companies with turnovers

of less than ¤7.5m.

Data available at the time was incomplete. ■

Companies were also contacted directly to provide ■

estimates in the absence of publicly available data and fi nal

fi gures depended on data provided.

No breakdown was possible between foreign-earned ■

revenue and revenue earned locally.

In terms of physical size the data did not include public ■

bodies or industry associations.

Despite these qualifi cations, there were a number of signifi cant

fi ndings from this study:

Total employment was estimated at 8,300 in Maritime ■

Transport services and 14,000 when other direct transport

services were included.

The Maritime Transport sector employed more than 50% ■

of all people directly employed in the Marine sector in

Ireland.

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

IRISH MARITIME CLUSTER: TURNOVER BY SECTOR

Sector Turnover ¤m Market Share Number of Employees Number of Companies

Ship Broking/Agents ¤153.8 9.0% 1143 59

Liner Shipping services ¤155.9 9.2% 868 82

Ship Owners/Managers ¤820.4 48.6% 2542 19

Port Companies ¤100.6 6.0% 690 18

Banks & Legal services ¤110.0 6.5% 36 11

Surveyors/Safety & Training ¤3.8 0.2% 62 32

Freight Forwarders & Logistics ¤301.2 17.8% 2253 37

Stevedores ¤7.5 0.4% 74 17

Ancillary Services ¤38.4 2.3% 332 40

¤1,691.6 100.00% 8300 315

Turnover was estimated at approximately ¤1.5 billion for 2004.

The maritime services sector contributed to more than ■

50% of the combined direct turnover of companies

employed in the sector.

Average employee turnover was estimated as ¤210,000 ■

for the transport segment.

The shipping sector also had the highest economic output ■

and the highest economic employee multiplier of all of the

marine sectors.

A key fi nding from this analysis was that, in terms of size and

turnover, the Irish maritime transport cluster was the largest

segment of the current Marine Industries Portfolio.

THE IRISH MARITIME CLUSTER

Over the past six years a number of international studies on

maritime and other industrial clusters have been reviewed. These

show how to defi ne such a cluster and the resources required,

both physical and fi nancial, to develop and expand it. The Offi ce,

through the Marine Institute’s NDP, has funded a three year PhD

programme specifi cally researching Irish shipping and Maritime

Transport clusters.

While there are many methods of illustrating the industry and the

size of sectors in it (numbers of companies, numbers employed,

etc) the following table shows size of Irish Maritime Cluster, and

the main sectors in it, by turnover.

In Section 1 we highlighted how certain maritime clusters

develop in a particular location at a particular time. The Irish

maritime cluster is essentially a local cluster providing services

and facilitating economic growth. Initial analysis from the IMDO

stakeholder survey identifi ed that 47% of companies in the

cluster had only a moderate interaction and understanding of

other companies in the cluster, while a further 14% said they had

a very low or insignifi cant knowledge of the cluster dynamic.

There is therefore work to be done to make Irish operators aware

of other services that are available to them locally, from the

Irish cluster.

While local knowledge of the local cluster may be limited, this

sector is now a net exporter, rather than an importer for the Irish

economy.

As mentioned in the introduction, we have broken down the Irish

maritime cluster as follows:

Core services. ■

Liner and bulk services. ■

Support & agency services. ■

Maritime commerce. ■

Freight & logistics. ■

Knowledge and innovation. ■

Government regulation. ■

Professional bodies. ■

The chart opposite is a comprehensive representation of the

Irish maritime cluster as defi ned by the IMDO. The chart shows

the interaction and spread of activities of different services all

of which are related to the core activities of the port and ship

operations.

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PAGE 28

THE IRISH MARITIME CLUSTER

Support

& Agency

Services

Maritime

Commerce

Freight

Forwarders

& Logistics

Providers

ICT Services

Education

Surveyors/

Technicians

Research

& Consultants

Ship Managers

Agents

Shipper or Charterer

Road Haulage

2 PL

3 PL

Ocean &

Air Forwarders

Ship Brokers

Legal Advisors

Bankers &

Accountants

Marine Insurers

Knowledge

& Innovation

Services

Liner

Services

Ancillary

Services

Professional

Services

IIMM

CITL

ICS

IPA

IRHA

IMLA

IME/NI

IHMA

MSD/MSO

IMDO

Dept of Transport

Lo-Lo Operators

Ro-Ro Operators

Ferry Services

& Tourism

Repair &

Manuafacturing

Chandlers

Offshore

Government

& Regulators

CORE SERVICESSHIP OWNERS

& PORT OPERATIONS

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PAGE 29

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

CORE SERVICES

This segment comprises commercial ports and ship-owning

and operation. These companies lie at the heart of the Irish

maritime cluster, they are the largest in terms of turnover and

employment, they have the highest multiplier in terms of indirect

employment, they have the highest turnover of all the cluster

components, and they have invested approximately ¤1 billion

over the past decade. In essence, these core services sectors

sit at the centre of the Irish maritime cluster and they are the

dynamos that drive its growth.

In the last decade we have seen more Irish ship owners investing

outside Ireland through merger and acquisition activity and

joint ventures, and some Irish ports appear now in a position

to expand their services and export their expertise (this can be

compared to the ESB, which developed its know-how servicing

the domestic market and was then able to establish ESBI, a

successful international consultancy fi rm).

Both segments of the Irish maritime cluster, the Ports and Ship-

Owning, have benefi ted from positive regulatory interventions in

the past decade. While these segments of the cluster are defi ned

as core, the ports and Ship-owning communities are affected by

different policy drivers and competitive issues. We will discuss the

profi le, role, and broad issues for both of these independently.

We have seen at a global level a high degree of vertical integration

in the shipping market with major shipping companies buying

major ports, and major port companies acquiring shipping assets

as part of their business portfolios. A benign tax and pro business

environment is also conducive to attracting non-indigenous

industries to locate within these segments. Ireland has some

success in securing investment from overseas in these areas

and there has been tangible evidence of the impact that this

investment has had on catalysing growth in other commercial

services to these companies.

Ship-owning

The Irish ship-owning sector is relatively small compared to other

European clusters, yet it is the largest employer and has also the

largest combined turnover, estimated at just under ¤900m or

48% of annual turnover, of all companies in the cluster.

Vital Stats: Ships Owned, Operated or Managed

from Ireland.

Irish owned/operated fl eet 2000: 51

Irish owned/operated fl eet 2006: 163

During the last two years certain subdivisions of the industry have

endured major turbulence which has resulted in restructuring

and job losses. The total number of employees has decreased

by more than 840 over the past 24 months. These jobs were

principally all Irish seagoing staff, with more than 60% of the

jobs located in the hotel and onboard catering services. It must

also be mentioned that while traffi c volumes overall have shown

healthy growth in recent years, car and passenger ferry traffi c has

declined. This is partly due to strong competition from low cost

airlines (see diagrams under “Liner Services”).

Section two of the report identifi ed the highly cyclical and risk

intense nature of this business. It also highlighted the mobile and

intensely competitive nature of this industry and the evolving

pattern during the 1980’s of fl ags of convenience and the

migration of ship-owning to offshore centres. Traditional Irish

Ship-owners, mainly operating in UK and Northern European

trades, have also had to survive in highly competitive markets.

The introduction of various state aids by the Irish Government

such as PRSI relief and Tonnage Tax has provided some level of

equalisation with other owners and operators located outside

of Europe.

Vessels Owned/Operated

from Ireland 2006

Total Fleet Vessels x Irish

Flag

Arklow Shipping Company 42 31

Celtic Link 2 0

Coastal Container Lines 3 0

d’ Amico 60 0

Emerald Isle Group 2 0

Eucon/Eurofeeder 10 1

Irish Ferries 4 0

Irish Mainport 35 10

North Atlantic Shipping

Company

2 2

Marine Institute 2 2

Commissioners of Irish Lights 1 1

Returns by the Irish Chamber of Shipping indicate that in 1990

the number of ships owned/managed and controlled by Irish

companies on the Irish Register was 90. By 2000 this was 51

vessels, of which 41 of these were registered under the Irish fl ag.

Several Irish Ship-owners were relocating offshore, or had gone

bankrupt over the next 10 year period.

Registration of vessels under the Irish Flag was the historical

method used to calculate Irish-controlled tonnage and it

broadly refl ected the number of vessels owned and managed

from Ireland. By 2006, the number of vessels owned by

Irish companies and controlled by Irish-based operations had

increased to 163, some of this growth can be attributed to the

positive impact resulting from the introduction of tonnage tax in

Ireland. For a short period of time, between 2001-2003, Irish

Ship-owners recommenced registration of ships under the Irish

fl ag, buoyed by changes to the development and fi scal climate.

We conservatively estimate that Irish based owners have invested

in excess of $1 billion dollars in new vessels and machinery

over the past decade. There are currently a further 6 new-build

vessels on order. Irish Ship-owners operate in passenger, Ro-

Ro, Lo-Lo, tanker, dry bulk, offshore and research sectors. From

our review it is clear that Irish shipping companies in this sector

have continued to reinvest and improve the type and quality

of vessels under their ownership or operation. We believe that

the effi ciency gains produced as a result of cost savings are

passed back to the customers through new investment in ships

or competitive price structuring.

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PAGE 30

While the availability of lower-cost European seafarers has

eroded competitiveness in lower Irish sea-going ranks such as

hotel and catering staff, the demand for senior Irish offi cers by

Irish and European companies remains buoyant.

The growth of the ship-owning sector is an important economic

contributor to the economic national maritime cluster, in particular

the signifi cant tangible spillover effect into the fi nance, tax, legal,

consulting, training & education, and shipbroking sectors.

We believe that simply measuring the health of the sector purely

by the number of vessels registered on the Irish register that the

following direct metrics provide a better indication of the wealth

and strength of the Irish ship-owning sector located here:

The benefi cial ownership, management and operations of ■

ships by companies managed and controlled in Ireland.

The number of companies undertaking this activity ■

from Ireland.

The combined annual turnover of these companies. ■

The number of European offi cers and senior ranking ■

crew employed.

Average salary paid to offi cers. ■

The number of Irish cadets engaged ■

in onboard training per annum.

Port Sector

Similar to the Ship-owning, this sector has a high impact on other

dependent sectors of the Maritime Cluster overall. The Ports

have a turnover of just over ¤100m and employ 690 people,

with Dublin and Cork the largest employers. Employment in this

sector has reduced signifi cantly over the last decade, much of

which has been driven by effi ciencies through the introduction of

greater automation and specialised handling equipment as well

as the increased unitisation of cargo.

IRISH PORTS: VITAL STATISTICS.

Number of Irish Ports and Harbours: 22

Number of Corporatised Ports: 10

All Irish ports, with the exception of Greenore are

100% owned by the Irish Government.

Total Bulk Tonnage Handled 2005: 32m

Total Unitised Handled 2005: 996,403 TEU’s

and 805,641 trailers

While the combined turnover of the ports sector is relatively

small, its economic impact is enormous and its effectiveness has

major signifi cance on the performance of the wider economy.

In our opinion, the ports sector has been a silent partner to the

success of the economy over the past decade. This is not widely

recognised by many stakeholders outside of those directly dealing

with the ports. From our review it is clear that Irish companies in

this sector have invested and innovated in anticipation of market

demand. Through effi ciency gains the sector has improved its

productive output, increased service capacity and cut costs, all

of which fl ow back through the economy.

Some notable statistics over the past decade include the

following:

Between 1995 and 2005 port tonnage has grown by 61%. ■

There has been a 79% increase in direct shipping services ■

between Ireland, UK and Continent over an 11 year period.

Growth in Lo-Lo traffi c is 89% since 1996. ■

Growth in Ro-Ro over the past 10 years is 87%. ■

The increase in the number of cruise ships calling at Irish ■

ports between 1995 and 2005 is over 150%.

GROWTH OF PORTS TONNAGE 2000 – 2005

There are a number of trends that enhance ports effi ciency and

productivity gains, including better, faster, and larger vessels,

higher levels of automation and improved unit productivity.

Ireland’s GDP has a high level of dependence on multinational

corporations, estimated at 85% of the value of merchandise

exports. Given the competitive nature of global trade, these

companies are continually seeking to maximise their own

effi ciency gains through seamless supply chain systems. Ireland is

losing its competitiveness in other areas due to wage and higher

infl ationary measures, and further erosion in supply chain costs

would clearly have a major negative impact on future decisions

by multi-nationals.

In this respect Ireland has been lagging and international

surveys of competitiveness from organisations such as the IMD

(International Institute for Management Development, Lausanne,

Switzerland) and the World Economic Forum consistently point

to the weakness of Ireland’s infrastructure and defi ciencies in

access facilities. The growth in Irish trade as part of world trade

and the concurrent growth in freight volumes transported by

sea needs to be viewed in the context of the evolving nature

of international manufacturing and distribution with careful

consideration given by the Irish government to this area from a

policy perspective.

48000

50000

52000

54000

44000

46000

0

Year

Tonnes

(000)

42000

40000

2001

2002

2003

2004

2005

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PAGE 31

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

The Irish ports sector was reformed by Government policy with

the introduction of the Harbours Act in 1996, discussed in more

detail in section 4. This changed the way ports operate and invest

in their facilities and has stimulated and encouraged new direct

shipping services. Recent high-level reports commissioned by

the Government acknowledge that there is greater competition

within and between port companies. This ultimately creates

greater economic effi ciencies and a more effi cient operating

environment for Irish industry overall.

While this policy intervention has been positive, there are

misconceptions at large, both within the media and the industry

regarding port capacity in particular. The Government has

undertaken several high level reviews of ports capacity during

the last eight years, including those undertaken by Packer &

Associates, Baxter Eadie, Raymond Burke et al., and most

recently by Fisher Associates.

While these reports have been extremely important, they

inevitably refl ect variation in the terms of reference, and differing

approaches and expertise of the authors concerned. This invariably

creates inconsistencies in the information provided, gives rise to

dispute from the parties affected, and makes accurate long-

term forecasting diffi cult.

As a result of its previous consultation process, the Government

issued its Ports Policy Statement in January 2005. We believe

that this report provided more clarity to the sector, but will

require constant review and monitoring, particularly regarding:

Competition.1.

Market capacity & effi ciency.2.

The role of private sector.3.

Government ability to intervene in the market, including 4.

mergers and amalgamations etc.

Disposal of non core assets.5.

Ports have a duty to respond to market demand with commercially

viable projects to develop their capacity and enhance their

effi ciency. In certain cases, Dublin is a good example, the private

sector becomes involved in certain aspects of port operations,

creating competition not only between ports, but even within

an overall port facility. Disposing of non-core assets is a source

of funding encouraged by the Policy, but this is an operation

which requires care and due diligence by the Port authority and

ultimately by the share-holder.

There are several current or recent cases of ports moving

downstream, and selling off the upstream assets rendered

non-core by the move. However, as a commercial port pursues

bottom line results, the distinction between core and non-core

could easily become blurred. In virtually all cases, waterfront

property has greater value to a property developer than to a port

operator, and a short-term, bottom line profi t could be made

at the expense of a medium to long term loss of port capacity

or port development potential. Predatory asset stripping of the

ports and ongoing speculation by the private sector in port

estates is a real danger, which could have national consequences

if not carefully monitored.

From the point of macro-economic planning, it is important to

ensure that port capacity issues, including the overall national

capacity, are duly considered in the event of disposal of

Port estates

Ports are becoming less of a distinct entity and activities

extend beyond the traditional port precinct. They need to

integrate into other areas such as IT, be prepared to extend

their activities into transport hubs, and become more a link in a

seamless logistics chain.

Our fi ndings agree with the Ports Policy Statement that there

is competition between the Ports, and overall, apart from

ongoing discussions relating to capacity constraints, the sector

is competitive.

Nonetheless, it appears that the following items require further

consideration:

Port operations in general, and capacity constraints ■

in particular are regularly reviewed on behalf of the

shareholder, and the current situation is being addressed

by Fisher & Associates. However, a systematic, long-term

approach would provide Government with a consistent

picture, and would facilitate policy-making.

Operations of Irish ports need to be systematically ■

benchmarked against best practice elsewhere to help them

adapt to the expectations of their users29.

The costs of congestion, or ‘bottlenecks’, in the Irish supply ■

chain, and the scarcity of infrastructure or capacity are

key challenges in the Ports and logistics sector. They are

challenges currently being faced by many countries globally.

Ports are no longer simply public utilities, their location ■

and land banks represent multi-million Euro and in some

cases, billion Euro values which require careful due diligence

and monitoring.

29 A High level Review of the State Commercial Ports; DoCMNR: April 2003

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PAGE 32

LINER & SHORT SEA SHIPPING SERVICES

This sector is made up of direct regular shipping services from

Ireland. Although the liner services operate in two separate modes

Ro-Ro and Lo-Lo, essentially they compete for market share.

The average size of container vessels calling at Irish Ports has

increased by 300% in terms of unit capacity in the past decade.

Some of the new ships on order for the world market now give

a TEU capacity in excess of 10,000 which will continue to have

a knock-on effect in the feeder markets. As we have previously

indicated, the Irish ports sector has seen substantial growth. The

table below sets out the steady rise in Lo-Lo traffi c and capacity

over the last decade. Between 1996 and 2004, unitized traffi c

has increased from 430,000 to 760,000 in Ro-Ro freight units,

and in Lo-Lo containers from 530,000 to 930,000.

10 YEAR TREND OF LO-LO TRAFFIC THROUGH IRISH PORTS

Number of TEU’s

Port 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 10 yr avg

Dublin 290,564 327,884 381,334 422,927 440,892 449,406 435,451 456,027 495,862 540,779

Avg annual growth 13% 16% 11% 4% 2% -3% 5% 9% 9% 7%

Drogheda 4,585 4,232 3,617 3,311 3,843 8,487 45,121 63,000 61,392 48,373

Avg annual growth -8% -15% -8% 16% 121% 432% 40% -3% -21% 62%

Waterford 149,779 131,020 61,345 85,967 105,896 131,518 140,579 147,166 175,049 180,216

Avg annual growth -13% -53% 40% 23% 24% 7% 5% 19% 3% 6%

Cork 59,091 64,930 84,183 97,835 115,495 120,740 117,703 121,279 137,246 155,081

Avg annual growth 10% 30% 16% 18% 5% -3% 3% 13% 13% 12%

Total ROI 504,019 528,066 530,479 610,040 666,126 710,151 738,854 787,472 869,549 924,449

Avg annual growth 5% 0% 15% 9% 7% 4% 7% 10% 6% 7%

10 YEAR TREND OF RO-RO TRAFFIC THROUGH IRISH PORTS

Number of Freight Units

Port 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 10 yr avg

Dublin 205,311 340,983 378,101 398,636 451,161 489,669 528,036 554,496 570,789 608,088

Avg annual growth 66% 11% 5% 13% 9% 8% 5% 3% 7% 14%

Rosslare 73,589 70,147 74,916 92,125 100,629 100,950 106,064 104,718 112,010 121,493

Avg annual growth -5% 7% 23% 9% 0% 5% -1% 7% 8% 6%

Dun Laoghaire 40,713 14,695 32,663 42,029 40,419 39,080 35,820 30,335 34,745 29,787

Avg annual growth -64% 122% 29% -4% -3% -8% -15% 15% -14% 6%

Cork 6,412 6,104 5,581 6,207 5,994 3,940 3,777 3,712 4,529 5,895

Avg annual growth -5% -9% 11% -3% -34% -4% -2% 22% 30% 1%

Total ROI 326,025 431,929 491,261 538,997 598,203 633,639 673,697 693,261 722,073 765,263

Avg annual growth 32% 14% 10% 11% 6% 6% 3% 4% 6% 10%

Source: IMDO

Similarly, the Ro-Ro market over this period of time has seen

strong growth of 10% over this period with the largest share in

terms of volume growth taking place in Dublin.

The growth in capacity has been supplemented by continued

growth and investment by the liner operators on these routes.

Key corridors such as Rotterdam in particular have seen the

largest amount of investment in new capacity, competition and

market entrants over this period.

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PAGE 33

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

One section of the Ro-Ro liner business which is not faring well

is the car ferry business. The chart shows that the decline in

sea passengers traveling by ferry since 1995 is 14%. While this

was partly due to the dramatic growth in low-cost airlines (the

dramatic growth in Ryanair since the turn of the century is also

illustrated) it was a further challenge to which the ship-operators

had to respond. This was highlighted by the restructuring in Irish

Ferries in 2005.

TREND IN PASSENGER FERRY TRAVEL 2000 – 2005

RYANAIR: PASSENGER GROWTH IN MILLIONS

Source: Company Website

The main thrust of liner and short sea traffi c in Ireland is freight,

and the development of this sector over the past decade has

also seen two notable trends:

Today, 80% of the companies providing direct shipping 1.

services are owned or have their principal place of business

outside of Ireland. These companies have also established

local Irish offi ces and have also invested in new ships and

freight capacity. Much of this has been invisible to the Irish

economy. Today there are 74 separate services, serving 52

ports in the UK, Continent and Mediterranean.

The larger companies have vertically integrated their 2.

operations, expanding and directly investing capital into:

Port terminal operations. ■

Depot management & warehousing. ■

Logistics door-to-door services. ■

Transportation and logistics management. ■

VITAL STATS: LINER ROUTES

Liner Routes 1999: 47

Liner Routes 2006: 74, Serving 52 ports in UK,

Continental Europe, North African,

Mediterranean

While the number of liner services calling at many of the second

tier ports has remained relatively constant between 1999 and

2005, there has been a major increase in the number of services

overall, particularly at the major ports and an expansion in the

range of export markets served. The growth in liner services also

indicates the shift to unitised trade and the choice of new markets

open to the Irish importer/exporter. As one would expect, the

Irish-controlled shipping fl eet has also grown in sophistication

over the past six years. For example the MV Ulysses was the

largest and most modern type of vessel of her class in the world

when she was introduced in 2002. This represented a paradigm

shift in the type, class and quality of ship serving this particular

route. Other operators followed this investment lead, introducing

larger and more modern ships. In 1996, the average size of a

TEU vessel serving the Irish market was roughly 240, today it is

between 600-800 TEU.

4500

5000

3500

4000

0

Year

Tonnes

(000)

3000

2500

1995

2000

2001

2002

2003

2004

2005

40

0

5

10

15

95 96 97

Year

98 99 00 01 02 03 04 05 06 07

35

30

25

20

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PAGE 34

As we have already mentioned, the pro-business environment

within the ports sector combined with rapid economic growth

has made an important contribution to the growth of these

services both for unitized and bulk traffi c over the past decade.

The table below highlights the development of direct shipping

services over the last decade.

LINER ROUTES TO AND FROM IRELAND

Republic Northern Ireland

Port Number of Services Port Number of Services

1999 2006 1999 2006

Dublin 15 29

Dun

Laoghaire

1 1 Belfast 10 10

Cork 6 14 Larne 3 4

Waterford 4 5 Warrenpoint 2 2

Rosslare 5 5

Drogheda 1 3

Shannon

Foynes

0 1

TOTAL 32 58 15 16

“Routes” are defi ned as operator x destination, e.g. Dublin-Holyhead x Stena counts as one route.This chart does not indicate frequency of service on any route.

LINER ROUTES TO AND FROM IRELAND 1999 – 2005

Earlier in the report we identifi ed the level to which major liner

companies have embedded themselves into the Irish market.

Today six of the world’s top ten global container companies have

established operations in Ireland, while the other four operate

here through agents. The IMDO has provided expert support

during this process to companies such as APL., MSC, and CMA-

CGM, and continues to work with them for new opportunities.

WORLD’S TOP CONTAINER COMPANIES

Container Group World rank Irish Operations

A.P Moller Maersk 1 Yes, Dublin

MSC 2 Yes , Dublin 2003

CMA CGM Group 3 No - Via agency

Evergreen Group 4 Yes, Dublin

Hapag-Lloyd 5 Yes, Dublin

CSCL 6 No - Via Agency

APL 7 Yes, Dublin (2005)

Hanjin/Senator 8 No - Via Agency

COSCO Container L 9 Yes, Dublin

NYK 10 No – via Agency.

SUPPORT & AGENCY SERVICES

VITAL STATS: AGENCY SERVICES

Ship agents/ turnover: ¤152m

Ship agents/brokers employment: 1143

Liner and Port agency turnover: ¤93m

Liner and port agency employment: 540

Ship management turnover: ¤4m

Ship management employment: 37

These services are dependent directly on the core shipping

services and include:

Ship agency activity. ■

Stevedoring. ■

Ship management. ■

It is one of the largest sub-sectors of the maritime cluster in

Ireland employing approximately 1,700 people directly with an

estimated annual turnover of ¤245m in 2005.30

30 Industry Health Check. Marine Institute (2005)

Dublin

Dun L

aoghaire

Cork

Wate

rford

Ross

lare

Dro

gheda

Shannon F

oynes

Belfast

Larn

e

Warrenpoin

t

1999 2006

30

35

20

25

0

Port

Num

ber

of

Serv

ices

15

10

5

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PAGE 35

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

These companies provide a broad range of services such as

handling and stevedoring, and may also include those typically

provided by freight forwarders. Ship and liner agents specifi cally

service a vessel’s requirements while in port, providing local

liaison services including victualling, crew change facilitation,

liaison with the port operator, etc. Irish ship agents may also

provide charter broking services to shippers, particularly for non-

regular bulk imports/exports.

There have been a number of mergers and acquisitions in this

market over the past fi ve years, particularly in the ship agency and

stevedoring business. This has meant fewer but larger companies

providing these services.

There is a sub-sector of agency activity that has developed

signifi cantly in recent years, namely the Cruise ships business.

The world market in total is estimated at ¤12bn and the overall

economic benefi t is believed to be twice that amount. In Ireland,

ship visits increased from 77 in 2000 to 127 in 2003 – and in

2004, Dublin and Cork between them had 75,124 passenger

“calls”. The purchase of goods and services in Ireland totaled

¤66m, sustaining 484 full-time jobs.31 Estimates for 2005 put

the total value on the sector for the Irish economy at ¤122m32

There have however, been indications from Dublin Port of

possible capacity constraints in handling this trade.

Ship management services also have the potential to develop

further in Ireland, though this activity is starting from a low

base. Currently, there are only four Irish companies providing

ship management services. The development of these services

is primarily linked to the availability of skilled technical staff.

The opening of the National Maritime College in Cork should

have a major impact of the development of a competitive ship

management sector.

MARITIME COMMERCE

Maritime commerce is a general term used to describe high

value intermediary services including:

Banking & fi nance. ■

Insurance. ■

Legal. ■

Taxation and accounting. ■

Shipbroking fi rms. ■

We have already identifi ed the economic importance of maritime

commerce to national and regional economies in places such

as London and Singapore. Prior to 1995, a large majority of

Irish companies requiring this kind of service, whether banking,

broking or legal expertise, went overseas, mainly to London or

the Netherlands. Since 1995 and particularly since 2001, there

has been growth in this sector in Ireland. In most cases this has

been driven by established fi rms capitalizing on new opportunities,

particularly major law fi rms, accounting services and major banks.

31 Marine Industries Global market Analysis; Douglas Westwood Ltd: March 2005

32 IMDO E-Newsletter no 15: Q1 2006.

Banking & Finance

Financial services companies, providing international services from

Ireland, have seen opportunities to establish separate operations

to compete in the lucrative local marketplace. In addition to

providing competitive international fi nancing, greater competition

has led to cheaper fi nancing locally for local companies. Cheaper

fi nancing and readily available maritime fi nancial expertise has

allowed a number of Irish owners to expand fl eets and grow their

businesses overseas (There nonetheless remains the requirement

for an effective scheme for seed-capital to support new ventures

in ship-owning and operation. This is discussed in Section 5).

In the last 5 years, we have seen much higher amounts of ship

fi nance and leasing activity taking place in Ireland, in particular in

Dublin, one Irish bank in particular has built up an international

shipping portfolio of ¤1.5 billion, mainly to foreign Ship-owners.

This has seen a number of other Irish based banks also seeking to

expand into this niche in the market place. It is noteworthy that

the entire ship fi nance market in London, a long established centre

for this activity, is believed to be about $37 billion. Maritime

commerce therefore has the potential to develop the reputation

of Ireland as a centre for international ship fi nancing in the same

way as has been achieved in aviation fi nance. However, a number

of European countries, notably the Netherlands and Germany have

introduced a system of tax-breaks to aid fi nancing of their national

fl eet, and these schemes have proved particularly successful. There

is evidence that the current lack of tax-based fi nance is driving

some ship-owners to other jurisdictions for fi nancing advantages.

As long as more competitive fi nancial environments are readily

available elsewhere, this will continue as an issue, and will limit the

net backfl ow into the economy.

VITAL STATS: SHIP FINANCE

CMA CGM Securitisation 2006: US$800m

Ocean Star Securitisation 2004: US$1,040m

Ocean Star Securitisation 2005: US$570m

Banks and Financial Institutions providing international and

national ship-fi nancing services from Ireland:

Bank of Ireland, Allied Irish Banks, Ulster Bank, Lombard Global

Finance (Ulster Bank), IIB, Bank of Scotland.

Ireland has also become a particularly attractive jurisdiction for

Securitisation. This is a highly sophisticated fi nancing technique

that allows the corporation to separate credit origination and

funding activities. The technique comes under the umbrella

of structured fi nance as it applies to assets that typically are

illiquid contracts. It has evolved from tentative beginnings in the

late 1970s to a vital funding source with an estimated total

aggregate outstanding of $8.06 trillion (as of the end of 2005,

by the Bond Market Association) and new issuance of $3.07

trillion in 2005 in the U.S. markets alone.

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PAGE 36

In the past four years there have been three major securitisations

of asset-backed portfolios by two major companies, an

international bank and an international ship-owner. These

securitisations also represent some of the fi rst undertaken in the

international shipping industry. CMA-CGM and HSH Nordbank

have securitisation ship portfolios and ship mortgage portfolios in

Ireland estimated at $2.4bn.

Insurance

The majority of marine insurance is placed in the London

market with Lloyds or the London Institute of Underwriters.

However, with the growth and expansion of fl eets in Ireland

marine brokerages services are likely to expand. Currently there

are six fi rms providing dedicated marine insurance brokerage.

Marine insurance claim activity can be a source of signifi cant

employment, often using former seafarers or others with marine

or insurance qualifi cations.

Insurance claims activity is already under pressure to move to

cost effective locations. Ireland is cost effective compared with

London and other United Kingdom locations. Ireland is well

served by telecommunications, air links and air courier links to

London, which are needed to ensure prompt transmission of

paper documents and face to face communications as needed.

Legal

The Irish Maritime Law Association represents Ireland at the

Comite Maritime International, one of the principal organisations

for advising on the preparation of international maritime

conventions. Ireland was one of fi ve members to construct the

constitution of this organization, and retains a role well beyond

its size. McCann Fitzgerald, Fitzpatrick and Associates, A&L

Goodbody and Mason, Hayes & Curran have secured business in

commercial maritime and/or admiralty legal services. In addition,

many insurance claims require legal activity for their resolution.

Attracting insurance claim activity to Ireland therefore would

have a multiplier effect for legal and allied expert services.

Taxation & Accounting

The growth in maritime investment in Ireland has also led to the

requisite growth in legal, company and tax services. In the past

six years all of the major tax and management consultant fi rms

have invested considerably to build up maritime tax capacity

including KPMG, Ernst & Young, PricewaterhouseCoopers and

Deloitte & Touche.

Shipbroking

Shipbroking has considerable potential to expand in Ireland. Several

niche shipbrokers operating here, servicing the international ship

sales and chartering markets, are estimated to have handle sales

and charter revenue in excess of $100million in 2005. Support

and investment in education is required to develop this potential

– and initial development work is underway.

Maritime commerce itself has developed strongly in recent years.

Ireland used to be a net importer of these services, but is now

a net exporter. The Irish maritime cluster is now contributing to

the nation’s invisible exports, and contributing to Ireland’s status

as a service economy.

The chart below demonstrates this development quite clearly.

Source:: CSO Balance of Payments Statistics

FREIGHT AND LOGISTICS OPERATORS

It is widely accepted today that supply chains and not companies

compete. This sector employs about 3,000 people directly

in maritime freight forwarding activity in Ireland, however this

fi gure could be as high as 14,000 if this was expanded to

include all other related logistics, supply chain, road transport

etc. The growth in world trade and the associated growth in

freight volumes transport by sea needs to be viewed in the

context of the evolving nature of international manufacturing

and distribution. These operators can provide services across the

full transport spectrum (Air, Sea, Road, Rail), and have not been

traditionally recognised in public policy as part of the maritime

cluster. However given the overwhelming volume of Irish trade

conducted by the sea they are de facto an integral aspect of the

shipping industry.

Earlier in this section we referred to vertical integration taking

place across the supply chain by both land-based and sea-

based operators. This is being driven by the increasing demand

of shipping consumers for just-in-time and more effi cient and

transparent services. Customers increasingly seek seamless

shipping processes. It has led to track and trace technologies

and a greater focus on the security of goods shipments by both

the shipper and national security agencies. Those providing a

shipping service see themselves today more as supply chain

companies rather than managers of discrete transport activities,

such as maritime transport, air transport, transport facilitating,

etc. Not only are the operators integrating, as Maersk, MSC, APL,

TNT etc., but so too is policy at EU level and also in a number

of Member States.

1000

500

1500

2000

2500

3000

3500

0

2000 2001 2002 2003 2004 2005

Transport Importation

m -

Transport Exportation

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

The IMDO believes that the integration of the entire transport

portfolio into one government department will provide a

greater scope for developing transport planning in an integrated

manner. It will facilitate the integration of National Policy to

match the reality on the ground, and will allow Ireland to align

itself with policy developments at EU level. Other European

maritime countries, such as Norway, UK and the Netherlands

have invested signifi cantly in their national capacity to plan and

develop their maritime economic capability, modelling, logistics

and transport planning. There is also a clear policy drive by the

European Commission to bring the whole area of freight logistics

closer to the shipping and maritime transport sectors, and Ireland

now has the opportunity to match this.

KNOWLEDGE AND INNOVATION SERVICES

The maritime cluster includes a growing IT and technology sector,

offering Ireland considerable potential for further development. A

number of companies have set up here to develop and market

special technologies for the shipping and marine markets (Transas

Ltd, Altobridge, Monicon). To date there has been little interaction

between them and other parts of the Irish maritime cluster, or

in the general areas of research and education. However the

IMDO has identifi ed this as an area of high potential growth

and innovation.

Ireland is progressing steadily towards a knowledge-based

economy, of which education and training is a vital component.

It is a priority investment under the National Development Plan

(NDP), which has provided for a total investment of ¤12.6 billion

(at 1999 prices) in employability and training measures, covering

early education, third level access, skills development, training

facilities, and apprenticeships. However, nationally expenditure

on Research and Development is falling well short of the EU’s

target set as part of the Lisbon strategy (3% of GDP) or even

the more modest national target of 2.5% This is clearly shown

in the following chart.

GROSS DOMESTIC EXPENDITURE ON

R&D (GERD), % GDP, 2004

Source: OECD, Main Science and Technology Indicators, 2006/Issue 1

As part of the Lisbon Strategy, the European Council set a target that 3 per cent of EU GDP would be spent on R&D by 2010. The Irish Strategy for Science, Technology and Innovation, 2006–2013 envisages Ireland reaching 2.5 per cent of GNP expenditure on R&D by 2013.

While the development in maritime education facilities is timely

and welcome, there has been limited investment in the research

and development capacity of this sector through any of the

previous NDP programs. Any investment in R&D should be

a factor that will assist Ireland Inc in differentiate itself from

competing locations and should provide value to the indigenous

sector and should help attract new investment.

The Government has also invested ¤51m in a new National

Maritime College in Cork, and this is reviewed elsewhere in this

memo. The college will hopefully become an internationally

recognized centre of excellence in the future for maritime

knowledge.

4.0%

3.5%

3.1%

2.7%

2.5%

2.5%

2.3%

2.2%

1.9%

1.8%

1.4%

1.2%

1.1%

1.1%

0.9%

0.6%

Spain

US

Finland

Hungary

Italy (‘03)

Ireland GDP

Ireland GNP

Netherlands

UK (‘03)

France

OECD

Denmark

Germany

Japan

Sweden (’03)

Poland

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%

Irish Target 2.5% Lisbon Target 3.0%

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PAGE 38

However, since the opening of the college, there has been no

increase in the throughput of Irish Offi cers (see chart), and those

who are coming through the system are tending to migrate towards

niche, high-value markets such as Cruise vessels and the oil and

gas vessels (VLCC,LNG, LPG). These are growth areas, with high

value potential, as referred to in Section 2 on world markets.

OFFICER TRAINING/NMCI 2003 – 2006

Number of offi cers trained at the NMCI 2003 - 2006

CADET EMPLOYMENT (BY TRADE) 2003 – 2005

Employment of Irish Cadets among different trades

GOVERNMENT & REGULATORS

Department of Transport

The transfer of the Ports and Shipping Portfolio to the Department

of Transport is designed to promote integrated transport policy.

It is obvious that much of the policy focus by the Department of

Transport has heretofore been focused on moving the factors of

production (i.e. people and materials) around the economy. This

is clearly refl ected by the very signifi cant investment programs by

the Government, in road, rail, bus and internal airlines. Transport

21 is an unprecedented investment program which is targeted

at improving modal mobility and meeting long term spatial

development needs. It is important that freight, logistics and

maritime transport are included in the multi-dimensional planning

that will underpin Ireland’s future economic competitiveness.

Given that Ireland has one of the most open economies in

the world, exporting 90% of its GDP, and that 85% of these

exports are due to FDI, it is important that the key outputs of

these investments fl ow seamlessly to the wider global economy.

The new integrated function of all of the key modes of industrial

transport and planning within the Department of Transport

provides the ultimate opportunity to assimilate strategies that

impact on the national and international supply chain.

In today’s highly globalised environment, supply chains are being

divided into ever fi ner segments, with activities being undertaken

in locations most suited to them (e.g. high volume manufacturing

in low cost countries)33. It is important that there is a policy

champion to identify trends and inform government planning of

the intrinsic role that ports, shipping and the entire logistics chain

have in continuing to deliver strategic competitive advantage.

In some instances the government role still lies in being an effective

service provider in the domestic market (i.e. as it major shareholder

in 90% of Irish port companies). This role should be supported by

policy and integrated planning at the highest level. It should continue

to research and explore opportunities for emerging technologies in

the scope of public/PPP construction projects where they might

add value to these shareholdings. The ability to plan and continue

to monitor, benchmark and assess the investment requirements of

these national assets, is in our opinion, highly important.

Maritime Transport Division

This division within the Department of Transport is responsible

for Ports and Shipping Policy. The Unit is responsible not only for

policy for the core elements of the sector, it is also responsible

for the corporate governance of the entire government ports

portfolios. Port companies have been transformed from state

utilities to companies that control, manage and operate vast

portfolios of high value real estate while also providing services

that are central to macro economic performance.

33 Enterprise Strategy Report, 2004

C Mate C Eng 2nd Eng

20

0

Certificate of Competency (CoC’s)

15

10

5

2004 2005 2006

Offshore

Cadet Numbers

Cruise

VLCC/LNG/LPG

General (Container/Bulk/RoRo etc)

0 10 20 30 40 50

2006 2003

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

The Strategic Objectives of the Maritime Transport Division are:

To facilitate the availability of commercial port services ■

which are effective, competitive and cost effi cient.

To ensure adequate infrastructure at ports to cope with ■

growing throughput and facilitate competitive shipping

services.

To facilitate the coordination and integration of maritime ■

transport within the total transport chain.

To implement the general strategic development framework ■

for State regional ports and harbours through transfer of

ownership to port companies or local authorities.

To maintain and increase the Irish registered/managed ■

fl eet.

The sustainable increase Irish seafarer and onshore maritime ■

sector employment.

Safety

On the 1st January 2006, the Maritime safety Directorate, and

the Irish Coast Guard moved to the Department of Transport.

The Maritime Safety Directorate34 comprises of two main

sections, the Maritime Safety and Marine Environment Division

(MSED) and the Marine Survey Offi ce (MSO). The Marine Survey

Offi ce also includes the Marine Radio Affairs Unit (MRAU). The

Mercantile Marine Offi ce (MMO) also works to the Directorate.

The Maritime Safety and Marine Environment Division is

responsible for maritime safety, security policy and legislation

(including leisure safety), aids to navigation and corporate

governance of the Commissioners of Irish Lights and marine

environment protection issues.

The Marine Survey Offi ce deals with the inspection, survey,

certifi cation and licensing of vessels and vessels radio equipment;

the examination and certifi cation of seafarers competencies;

enforcement of standards by way of audits on organisation and

facilities and prosecutions for breaches of regulations.

Irish Coast Guard (IRCG) The Irish Coast Guard (IRCG) is

responsible for Search and Rescue, Pollution and Salvage

responses in the marine environment, Marine Communications

Network and Marine Safety Awareness.

In the main, the functions of the Mercantile Marine Offi ce have

their statutory origins in two pieces of legislation, the Merchant

Shipping Act, 1894 and the Mercantile Marine Act, 1955. There

are numerous functions and duties imposed on the Mercantile

Marine Offi ce in these Acts. One of the main statutory functions

carried out by the MMO is the maintenance of the national

General Register of Shipping.

34 Source: Department of Transport Website.

REGULATION AND TECHNOLOGY

In addition to the opportunities and challenges outlined in this

memo, our research and stakeholder meetings identifi ed that

the following regulatory and technological issues will have

implications for the shipping and maritime sector in the future.

Maritime-related activities will be subject to increased ■

regulation.

Security issues will be a central element in the regulation ■

of the sector.

The ‘Polluter Pays’ principle and Road Pricing equivalents ■

such as green taxes will increasingly be applied to the

sector, and thus be critical economic factors.

The management and control of ships as polluting ■

entities will be integral to the successful operation of

the shipping sector.

Overall, a convergence of regulations worldwide in relation ■

to environmental matters in the shipping sector is expected.

The sector will see increased recognition of the economic, ■

environmental and societal impact of ports and shipping.

This will affect development of existing and new ports,

with, for example, land access issues being important in

new ports outside city/urban areas.

Technology will play an important role in the development ■

of the sector, with, for example, the development of

improved IT and Logistics Systems affecting both its

operation and management, and the use of technology

to assist in environmental mitigation and design issues.

Resources to direct Irish IT expertise towards the area

of maritime transportation have not yet been identifi ed

or allocated.

There are increasing numbers of, and regulation required for, ■

small craft such as leisure craft commercial angling and small

in-shore ferries. For example, Dun Laoghaire marina alone

has recently increased from 500 to 800 berths, and further

developments are envisaged to bring the total to 2,500,

a fi ve-fold increase. For VHF radio licences and call-signs

alone, this gives rise to a commensurate increase in demand

from the licensing authority.

PROFESSIONAL BODIES

Activities in the maritime transport sector are well represented

by twelve relevant associations (see appendix). These range from

Trade or Industry Associations which admit relevant corporate

members, to Professional Organisations which require, or can

grant, an academic qualifi cation. Many are branches of wider,

international organisations, or have international affi liations.

The various disciplines and corporate activities within the sector

are well taken care of, and Irish operators and professionals have

ready access to best practice internationally.

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PAGE 40

NEW HORIZONS

Over the last decade we have seen a transformation in the role

of internationally traded services in Ireland and have also seen

a growth here in demand for international Maritime Services.

Ireland has many of the key attractions for the industry such

as low taxation, English-speaking, stable economic environment

and good telecommunications. However, Ireland lacks two

essential elements, a strong track record in maritime commerce

and an experienced, skilled workforce.

Part of the initial IMDO strategy was to secure foreign direct

investment, stimulated purely by tax-based measures that we

will discuss later in this report. On closer examination of the

Irish maritime cluster, there is already a much higher level of FDI

present than had previously been identifi ed by the Government.

Therefore an increasing focus of IMDO strategy has been to

support many of these major FDIs already present and to

leverage further internal growth contributing to the maritime

cluster and economy.

Another major emerging trend in Ireland has been the rise of

outward investment by Irish fi rms. Outward investment began to

increase in the late 1990’s, albeit from a very low historic base.

This is a pattern consistent with that of other economies as they

move to higher stages of economic development. Since the late

1990’s, Irish Ship-owners have established overseas operations in

the USA, the Netherlands, Germany, Norway, South Africa and the

UK, and been involved in signifi cant merger & acquisition activity.

According to main Irish maritime companies, this outward fl ow

is complementary and even essential to the viability of their

Irish operations. Studies by Forfas show that outward direct

investment has positive benefi ts for the whole economy – it

boosts trade, technology transfer, and integration into global

production networks, and is a catalyst for movement into higher

value added activities.

In summary, the combination of organic growth and the knock-

on effect of both outward and inward direct investment all

contribute to the growing profi le and prosperity of the Irish

maritime economy.

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

CONCLUSIONS

The principal developments over the last 5 years that are noteworthy: ■

Three-fold increase in the number of ships owned managed and operated by Irish Ship-owners. ❚

Between 1995 and 2005 port tonnage has grown by 61%. ❚

There has been a 79% increase in direct shipping services between Ireland, UK and Continent over an 11 year period. ❚

Growth in Lo-Lo traffi c is 89% since 1996. ❚

Growth in Ro-Ro over the past 10 years is 87%. ❚

The increase in the number of cruise ships calling at Irish ports between 1995 and 2005 is over 150%. ❚

Emergence of a multibillion ship fi nance activity in Dublin. ❚

Growth of maritime commerce services. ❚

Emergence of greater outward direct investment and M&A activity by Irish companies overseas. ❚

During the economic boom, the Irish maritime transport and services sector has been a highly important but relatively ■

undervalued to the economy.

The Ship-owning sector in Ireland has invested signifi cantly over the past decade, somewhere in the region of ¤600m in ■

new and second hand vessels. The return on capital by commercial standards is modest compared to the tough, risky and

competitive environment.

There is signifi cant merit in introducing a specifi c system of tax based fi nance to develop the national fl eet. ■

Ports and Ship-owning sectors are the principal sectors whose effi ciency and investment provide the economic backbone ■

to much of the wider economy.

The ongoing trend towards increased globalisation and the future role of our ports in facilitating changing patterns of ■

globalised trade will present challenges for stakeholders.

An effi cient integrated transport network in Ireland will infl uence the decisions of multinationals to invest here. ■

There is a need for continuous planning for Irish ports recognising their important position as facilitators for the ■

Irish economy.

The Irish export profi le is expected to continue its change to more high-value knowledge-based products, yet there is little ■

research or economic profi ling to indicate the impacts these changes will have on the sector or the type of supports required.

The national maritime college in Cork presents signifi cant potential to expand and grow (export) maritime educational ■

services from Ireland.

Measuring the size and scale of Irish shipping on the basis of the Irish register alone is outdated. A far better measurement ■

is the number of ships owned, operated and managed from Ireland, regardless of their fl ag.

The drive to reduce logistics costs throughout the supply chain continues to exert pressure to integrate transport modes ■

including the use of satellite-based technologies for seamless route and traffi c planning. Ireland lacks innovation and

capacity in this area.

The decision to integrate the maritime transport portfolios back under the aegis of the Department of Transport will ■

provide better integrated transport planning policies across the sector, particularly between the maritime cluster and the

freight logistics sectors.

Peak oil and rising fuel costs will continue to be a challenge for this sector. ■

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PAGE 42

APPENDICES

Bibliography. ■

Comparison Of Leading International Maritime Clusters. ■

International Codes ISM (International Safety Management) ■

& IPS (International Ship And Port Facility Security Code).

Professional Associations. ■

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STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

STRATEGIC REVIEW OF THE

MARITIME TRANSPORT SECTOR

BIBLIOGRAPHY

DOCUMENT AUTHOR DATE

Report on Shipping & Marine Services Sector Deloitte & Touche, IDA, IIMM (Irish Inst. Of

Master Mariners)

Apr ’99

Transport Corridors in Europe Atkins McCarthy, Dept. of Environment & Local

Government

Nov 2000

Report of the Task Force on Seafarer Training & Employment Dept. of the Marine & Natural Resources 1999

Report on the Market for an STCW 95 compliant East Coast Facility KPMG, DoMNR Mar 2000

Maritime Ireland Opens for Business Marine Institute, DOMNR

High Level Review of State Commercial Ports Raymond Burke, Farrell Grant Sparks, Posford

Haskoning, DoCMNR

April 2003

Communication from the Commission to the Council on the training

and recruitment of seafarers

Commission of the European Communities

COM(2001)188 fi nal

April 2001

The NETA Project (Logistics Module) Interim Report Transport Policy Research Unit UCD June 2000

Developing Ireland as an Internationally Competitive Location for

Shipping Services

Cap Gemini, Ernst & Young, Marine institute July 2000

Turning of the Tide IMDO Advisory Group Nov 2000

Review of Maritime Transport 2005 UN Conference on Trade and Development 2005

IMDO Annual Report 2000-2005 (Internal) IMDO Jan 2001

Community Guidelines to State aid to Maritime Transport Commission of the European Communities 1997

Review of State Aid Guidelines to Maritime Transport and Proposals for

the Irish Shipping Sector

IMDO July 2005

IMDO Newsletters IMDO April 2002 – Q2 2006

A Tonnage based Corporation Tax for the Irish Shipping Industry:

Executive Overview

IMDO Sept 2001

Tonnage Tax: Specifi c Tax Measures for Inclusion in a Tonnage Tax

Regime in Ireland

KPMG, IMDO Dec 2001

Full Steam ahead! Review of 2001 IMDO Jan 2002

Activity Report 2000 – 2003. IMDO Advisory Group 2003

The Human & Other resource Requirements of the proposed New

Commercial Ships Registry

IMDO/D.N. Gabe Thomas Sept 2002

International Shipping Services: Report on the Development of a

Tax-based Strategy designed to Encourage Growth in the Maritime

Services Sector.

IMDO 2005

Task Force on Transport Logistics in Connection with Ports DoCMNR April 2002

Report on the development of Taxation Incentives for Investment in

the Irish Shipping Industry.

KPMG – IMDO Feb 2003

Effects of the UK Tonnage Tax on the Training of Irish Merchant Navy

Cadets

IMDO 2004

Summary Report Supporting Continuance of the Social Welfare

Contributionsand Insurability Refund to Irish Ship Owners

IMDO Jan 2004

2005 IMDO Corporate Plan Key Result Areas IMDO 2005

Marine Industries Global Market Analysis Marine Institute/Douglas Westwood Ltd. March 2005

Ahead of the Curve Enterprise Strategy Group/Forfas July 2004

The Economic Contribution of the Cruise Sector to the Island of Ireland

for 2003

UCC/Failte Ireland/NITB 2004

Irish Short Sea Shipping Inter-European Trade Corridors IMDO Logistecon 2004

Shipping Challenges for Ireland 2002 – 2012. Seminar Report IMDO November 2002

ISEAS Irish Seafarers Educational Assistance Scheme. IMDO Sept 2001

Ports IT Infrastructure Study SONAS Innovation/IMDO Sept 2005

IMDO Global Shipping Targets 2003 IMDO 2003

Discussion Document on Internationally traded maritime and Aviation

Services

IMDO June 2004

In addition to the above, 87 different “Maritime” mentions in legislation on the Attorney-general’s website were reviewed.

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PAGE 44

BIBLIOGRAPHY

DOCUMENT AUTHOR DATE

Beyond Tonnage Tax PWC/IMDO Date

Statement of Strategy 2003 - 2005 DoCMNR June 2003

The Future of London’s Maritime Services Cluster: A Call to Action Fisher Associates/Maritime London: Aug 2004

Availability and Training of Seafarers EU DSTI/DOT/MTC: Dec 2002

National Development Plan 2000 2006 Dept of Finance 1999

Annual Competitiveness Report 2005 Forfas. Aug 2005

Euromillions! Funding Opportunities for the Irish Maritime transport and

Research Sectors

IMDO: April 2005

Ports Policy Statement DoCMNR 2005

Economic Impact of State Commercial Seaports Indecon/IPA: May 2006

Review of State Regional Ports & Harbours DoMNR: June 1999

White Paper: European Transport Policy for 2010 EU:http://europa.eu/scadplus/leg/en/

lvb/124007.htm

2001

Maritime Ed & Training 2005: Corporate Plan

Idem: Corporate Review 2004 IMDO: 2004/5

Budget 2006: Review of Tax Schemes (Tonnage Tax) Dept of Finance: Feb 2006

“The New Titans” Survey of the World Economy “The Economist” 16 Sept 2006

The 35 Most Important maritime Countries, Tables 1998, 2000,

2005

UNCTAD Secretariat -

Green Paper: Towards a Future Maritime Policy for the Union EU Commission COM (2006) 275 Final June 2006

Flight Path to the Future: An Action Plan to Develop Aviation &

Aerospace Enterprise in Ireland:2004 - 2006

FAEI Feb 2004

Dynamic European Maritime Clusters Maritimt Forum, Norway & The Dutch Maritime

Network Series

Aug 2006

Marine Safety Directorate Dept of Transport Website Current

Report of Task force on the Development of Port Estates in

Commercial Harbours

Dept. of the Marine & Natural Resources May 2002?

Review of Practice Worldwide on the Development of Port Estates Plymouth Enterprise Partnerships Nov 2001

Review of Port Users Forums Dept. of Marine & Nat. Resources June 2000

Assessment of Irish Commercial Seaport Capacity Baxter Eadie/ DoMNR April ‘98

Task Force on Transport Logistics in Connection with Ports Dept. of Marine & Nat. Resources Feb 2002

Assessment of Shipping Costs to and from Irish Ports Baxter Eadie/ DoMNR July 2000

United Kingdom Seafarer Analysis 2005 London Metropolitan University 2006

In addition to the above, 87 different “Maritime” mentions in legislation on the Attorney-general’s website were reviewed.

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STRATEGIC REVIEW OF IRISH MARITIME

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COMPARISON OF LEADING INTERNATIONAL MARITIME CLUSTERS

Vibrant maritime clusters all bring high level economic benefi t, but the form that they take, and the factors that infl uence them, can

vary enormously. The following tables analyse them in more detail, and by way of further illustration, two further examples are included.

Cyprus is a relative newcomer, while Norway is another example of a traditional, well-established maritime cluster.

CENTRE

TRADITIONAL

OR NEWLY

DEVELOPED

CLUSTER

CENTRAL

ACTIVITIES INCENTIVES

VALUE TO

ECONOMY

NUMBER

OF PEOPLE

EMPLOYED

Cyprus Newly developed

Benefi ted from EU

membership.

Ship management Flag - White Tonnage

Tax Favourable tax

regime for ship

management.

No tax on profi ts

from operation or

management of a

Cypriot registered

vessel or dividends

received from a

shipowning company.

No capital gains tax

on the sale or transfer

of a Cypriot registered

vessel. No stamp duty

on ship mortgage

deeds.

4% to GDP41 Employs over 6,000

people.42

Singapore Newly developed

Serves as a gateway to

the Asian market.

Port, shipping and

shipbuilding and repair

dominated. Sizeable

register of shipping.

In recent years has

attracted a wide range

of ancillary services,

(ship management,

agency, fi nance,

insurance and law).

Flag - Grey Maritime

Foundation Cluster

Fund.

International Shipping

Enterprise Scheme.

MERIT Shipping &

Logistics Scheme.

MINT Maritime

Industry Attachment

Programme.

6% to GDP43

Directly contributes

some US$4.7 billion44

100,000 jobs45

Norway Traditional Globally

orientated.

Rejected EU

membership partly

to protect maritime

industry.

Dominated by the

shipping sector,

fundamental to the

economy.

Oslo is a major centre

for shipowning and

management.

Leading ship

classifi cation society.

Offshore market.

Flag - White Tonnage

Tax.

The average value

creation between

1998-2001 was

4.7bn US$46

Employs 65,000

people worldwide47

UK (London) Traditional Historical

and well established

maritime cluster.

Marine insurance, ship

chartering & broking,

ship fi nance, ship

classifi cation, legal

services & dispute

resolution, accountancy

services.

Maritime education

& training, publishing,

event organising,

research & technical,

engineering consulting.

Flag - White Tonnage

Tax Major source of

capital.

2004 maritime

services net overseas

earnings £1,301m48

Maritime services

sector provides

employment for

14,00049

35 Conway, M. (2006) Lloyd’s List Special Report: Shipmanagement, Powerful Umbrella Group speaks up for Cyprus.36 Conway, M. (2006) Lloyd’s List Special Report: Shipmanagement, Powerful Umbrella Group speaks up for Cyprus.37 Singapore Maritime Foundation Website.38 Opening remarks by Mrs Lim Hwee Hua, Minister of State for Finance and Transport, at the “Singapore Nite” Reception, 8 June 2005, Oslo.39 Opening remarks by Mrs Lim Hwee Hua, Minister of State for Finance and Transport, at the “Singapore Nite” Reception, 8 June 2005, Oslo.40 Jacobsen, Erik W, Ari Mortensen, Martin Vikesland and Alexander W Cappelen, Attracting the Winners, The Competitiveness of Five European Maritime

Industries, BI Norwegian School of Management 2002.41 Marine Norway website, The Norwegian Maritime Industry.42 IFS, (2005) City Business Series; Maritime Services. International Financial Services; London.43 IFS, (2005) City Business Series; Maritime Services. International Financial Services; London.

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PAGE 46

DRIVERS FOR

THE CLUSTER

LOCATION

ADVANTAGES

LOCATION

DISADVANTAGES

NEW AREAS OF

POTENTIAL GROWTH/

FUTURE DIRECTION

Cyprus Proactive government who

recognise the importance of

the shipping industry to the

economy.

Access to European market,

although not essential as

provides ship management

services.

Political instability due to

relationship with Turkey.

Effects of EU policy -

competition.

In order to retain sea-based

staff to provide greater

incentives such as more

training and pensions.

Singapore Had it origins as a sea town

from which the cluster has

grown.

Proactive government who

recognise the importance of

the shipping industry to the

economy.

Has understood the key

drivers of the maritime

economy and provided

conductive policies and

programmes to attract key

players’.

Huge investment in

innovation and R&D.

As the Asian maritime

market has rapidly expanded

Singapore has positioned

itself to become the hub for

the region.

The Singapore Maritime

Foundation is the primary

promoter of Singapore’s

maritime interests and

aims to advance the cluster

internationally.

Cluster growth is fuelled by

the development of the

individual elements.

Strategically placed to take

advantage of growth of

Asian markets.

Access to skilled and cost

effective workforce.

Only a small nation facing

competition from other

emerging maritime nations

such as China and India.

Looking to encourage

shipping companies, law

fi rms and ship fi nanciers to

set up operations in the

location.

To enhance its image as

a hub with access to a

regional market of 2.8bn

people50

Looking to attract maritime

associations has set aside

money from maritime

cluster and innovation fund

to enhance manpower

development and

technology.

Norway The cluster that exists today

is largely driven by Norway’s

history as a maritime nation.

Substantial number of

companies and individuals

who operate in the maritime

fi eld.

One of the most important

success factors is the

cooperation and synergy

that Norwegian shipping

companies have with one

another across the board.

This is the driver for the

Norwegian maritime cluster.

International perspective as

most products produced in

the cluster are exported.

Benefi ts of the maritime

environment outweigh the

cost of doing business there.

The population is intrinsically

linked to the maritime

industry and its importance

is recognised at an early age

through education.

An extensive coastline of

2650 km51.

Has access to the European

markets.

Offshore services sector

- now one of the most

signifi cant sectors for

Norwegian shipping.

Expansion into the LNG

market Value of the industry

is recognised by the

government.

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PAGE 47

STRATEGIC REVIEW OF IRISH MARITIME

TRANSPORT SECTOR

DRIVERS FOR

THE CLUSTER

LOCATION

ADVANTAGES

LOCATION

DISADVANTAGES

NEW AREAS OF

POTENTIAL GROWTH/

FUTURE DIRECTION

UK (London) London is losing it pre-

eminence as a maritime

cluster and is looking for

ways to reverse the decline.

It has been recognised that

there needs to be greater

government support, mostly

fi nancial, to maintain the

cluster.

London has a well-

established maritime

history and combined

with the current maritime

infrastructure is the primary

driver of the maritime

industry.

London has a vast

infrastructure of maritime

services and combined an

effi cient transport system.

Skilled workforce.

Access to a vast array of

expertise.

Cost of doing business is

expensive.

Employment costs are high.

Effects of EU policy -

competition.

To build on the existing

cluster activities through

greater interaction of players’

and remaining up to date

and innovative.

44 Lloyd’s List 29/09/2006 Inroads seen into Chinese and male domination.

THE INTERNATIONAL SAFETY MANAGEMENT (ISM) CODE

Background to ISM Code

Due to a number of very serious accidents which occurred ■

during the late 1980’s, which were manifestly caused

by human errors, with management faults also identifi ed

as contributing factors, e.g. The “Herald of Free Enterprise”,

the IMO.

The International Safety Management (ISM) Code evolved ■

through the development of Guidelines on Management

for the Safe Operation of Ships and for Pollution Prevention

adopted in 1989 at the 16th regular session of the IMO

Assembly by resolution A.647(16). The objective of the Code

was to provide an international standard concerning shipboard

and shore-based management. The Code became applicable,

under chapter IX of the International Convention for the

Safety of Life at Sea, 1974, fi rst for passenger ships, tankers

and bulk carriers on 1 July 1998, thereafter for all other ships

over 500 GT on 1 July 2002 and has, therefore, been in force

globally for just over two years.

Objectives of the ISM Code

The Code establishes safety-management objectives ■

and requires a safety management system (SMS) to be

established by “the Company”, which is defi ned as the

Ship-owner or any person, such as the manager or bareboat

charterer, who has assumed responsibility for operating

the ship.

The Company is then required to establish and implement a ■

policy for achieving these objectives. This includes providing

the necessary resources and shore-based support. Every

company is expected “to designate a person or persons ashore

having direct access to the highest level of management”.

The procedures required by the Code should be documented ■

and compiled in a Safety Management Manual, a copy of

which should be kept on board.

Impact of the ISM Code

The ISM Code has helped to improve the safety of ■

international shipping and to reduce pollution from ships

by impacting on the way shipping companies are managed

and operated.

Effective implementation of the ISM code has led to a move ■

away from a culture of “unthinking” compliance with external

rules towards a culture of “thinking” self-regulation of safety

- the development of a ‘safety culture’. The safety culture

involves moving to a culture of self regulation, with every

individual - from the top to the bottom - feeling responsible

for actions taken to improve safety and performance.

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PAGE 48

PROFESSIONAL ASSOCIATIONS

NAME OPERATION IRISH MEMBERSHIP

Institute of Chartered Shipbrokers An International organisation, headquartered in London. Membership is normally by

examination.

5 Corporate, 90 full,

and 25 student.

Institute of Marine Engineers An International organisation, headquartered in London, open to individual

membership. There are professional examinations for various levels of membership.

Approx. 450 members on

the Island of Ireland

The Nautical Institute An International organisation, headquartered in London, open to individual

membership. Professional qualifi cation is normally required, but there is also a

“Companion” category.

176 members.

Irish Institute of Master Mariners Irish Organisation with two international affi liations (IFSMA &CESMA). Membership

is individual, and requires a Class 1 Master Mariners Certifi cate. Cadet members also.

450 members, incl

Associates and Cadets.

Irish Maritime Law Association

(Comite Maritime International)

Irish organization affi liated to the Comite International Maritime, which aims to unify

and simplify (international) maritime law.

53 corporate members,

and 38 individual,

mainly barristers.

Chartered Institute of Transport

and Logistics in Ireland

Part of an international network. Membership normally requires a qualifi cation or

requisite experience.

1190

Irish Offshore Operators Association Trade Association for companies holding offshore exploration licences. 8

Irish Chamber of Shipping Trade Association for corporate members, with a number of international affi liates. 10

International Harbour Masters

Association

International professional organisation with an Irish branch, open to members

holding an appropriate position.

176 full members, of

which 10 are in Ireland.

Irish Ports Association Trade Association open to individual and corporate membership. 27 members, of which 19

are full members

Irish Road Haulage Association Trade Association open to currently licensed hauliers, with associate membership

also available.

Over 1000

Irish Ships Agents Association Trade Association open to corporate membership. 40

THE INTERNATIONAL SHIP AND PORT

FACILITY SECURITY CODE (ISPS CODE)

Background to ISPS Code

The International Ship and Port Facility Security Code (ISPS ■

Code) is a comprehensive set of measures to enhance the

security of ships and port facilities, developed in response to

the perceived threats to ships and port facilities in the wake

of the 9/11 attacks in the United States.

The ISPS Code is implemented through chapter XI-2 Special ■

measures to enhance maritime security in the International

Convention for the Safety of Life at Sea (SOLAS). The Code

has two parts, one mandatory and one recommendatory.

In essence, the Code takes the approach that ensuring the ■

security of ships and port facilities is a risk management

activity and that, to determine what security measures are

appropriate, an assessment of the risks must be made in

each particular case.

Objectives of the ISPS Code

The objective of the ISPS Code is to provide a standardised, ■

consistent framework for evaluating risk, enabling Governments

to offset changes in threat with changes in vulnerability for

ships and port facilities through determination of appropriate

security levels and corresponding security measures.

Ship and port facility security is a risk management activity. ■

As with all risk management efforts, the most effective

course of action is to eliminate the source of the threat.

Eliminating the source of the threat, which in this case is

those that would commit acts of terrorism or otherwise

threaten the security of ships or of the port facilities, is

essentially a Government function. 100% security is an

aim but cannot be guaranteed - hence the risk reduction

approach to lessen possibilities to the lowest practicable.

Contracting Governments are obliged to address all the ■

objectives and functional requirements of the ISPS Code and

to ensure that appropriate security measures and procedures

are in place in the port facilities and waterways located

within their territory.

Impact of the ISPS Code

The new requirements form the international framework ■

through which Governments, ships and port facilities can

co-operate to detect and deter acts which threaten security

in the maritime transport sector. The whole idea of the ISPS

Code is to reduce the vulnerability of the industry to attack,

thus countering the threat and reducing the risk.

There are potential commercial benefi ts to the maritime ■

industry in implementing the Code. It seems clear that,

in the long run, implementation of the Code should provide

considerable cost-benefi t for the port industry as a whole

and for individual ports. By putting in place an effective and

compliant security regime, ports will be able to continue

to participate fully in global trade and, of course, the

potential economic consequences of a major security breach,

which might result in disruption or even port closure, are

serious indeed.

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